The Italian government is likely to acquire at least 20 per cent stake in Titagarh Wagons's wholly-owned subsidiary Firema SPA, sources said on Sunday.
Invitalia, the Italian government's investment promotion agency, will be acquiring 20-30 per cent stake in Firema, they said.
Titagarh Group was in dialogue with the Italian government for capital support after the company faced financial headwinds during the pandemic.
Firema, which is executing railway projects in Europe, is also instrumental in building India's first aluminum coach, for Pune Metro.
"It is a major breakthrough that the Italian government will pick up a stake, apart from a PE investor, in Firema. The promoters will also infuse fresh capital. We cannot disclose the details at this moment due to confidentiality clauses until all approvals are in place," Titagarh Wagons MD Umesh Chowdhary told PTI from Italy.
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Italian railway firm Firema was taken over by the Kolkata-based Titagarh Group in 2015.
"We will retain the majority stake in the subsidiary, which now has a paid up capital of 13 million euros. Now, we have 100 per cent ownership in Firema, but it will get diluted after the entry of new investors," Chowdhary said.
"Italian government's investment will open a sea of opportunity for the company. Government backing will help us secure more orders and the recapitalisation will boost the execution of new contracts," he said.
Firema SPA had reported a loss of around 9 million euros in the last fiscal, including one-off exceptional expenses totalling 4.5 million euros due to operational restructuring.
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Chowdhary said he expects Firema to become EBITDA-positive in the current fiscal, and will take another year to be Net-positive.
The company was suffering due to legacy orders. Currently, it has a healthy order book of 500 million euros, which is expected to be executed in the next four-five years, he said.
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