History

_x000D_ Indian Railway Finance Corporation (IRFC) Ltd was incorporated on December 12, 1986. It has been classified as a systemically important non-deposit-taking NBFC, specifically an infrastructure finance company i.e. an NBFC-IFC by RBI since 2010. It is a Schedule A Public Sector Enterprise administered by the Ministry of Railways (MoR), Government of India. Since its inception in 1986,  the company has been involved in mobilising funds from domestic and international markets for Indian Railways. It has a large contribution to the growth of Indian Railways and related entities such as Rail Vikas Nigam Limited (RVNL) and IRCON. _x000D_ _x000D_ Over the years, IRFC has employed various financial instruments in order to raise money. For example:_x000D_

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• In 1996, it issued deep discount bonds to the public and also issued floating rate notes worth $70 million in offshore markets.
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• In 1998, it issued secured, redeemable, non-cumulative, taxable bonds to LIC for a 15-year tenure.
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• The following year, it issued secured, redeemable, non-cumulative, taxable bonds in Separately Transferable, Redeemable Principal Parts (STRPP).
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• In 2006, it issued floating-rate bonds in the Indian capital market.
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• In 2011, it raised a foreign currency term loan from the American Family Life Assurance Company of Columbus for a tenure of 15 years.
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• In 2020, IRFC issued bonds worth $1 billion via Regulation S of the USA.
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_x000D_ In January 2021, IRFC successfully raised ₹4,633 crore through its IPO. It was a fresh issue of 118 crore equity shares aggregating to ₹3,088 crore and an offer for sale of 59 crore equity shares aggregating to ₹1,544 crore by the Indian government._x000D_

Business Segments

_x000D_ The following are the primary businesses of IRFC:_x000D_ _x000D_ Raising Funds for Railway Projects_x000D_ _x000D_ IRFC’s task is to minimise the cost of financing the acquisition of rolling stock assets, such as locomotives, coaches, wagons, trucks, flats, electric multiple units, containers, cranes, etc., as per the Standard Lease Agreements. IRFC does so by raising funds from taxable and tax-free bonds, term loans from banks and other financial institutions, commercial papers, external commercial borrowings (ECB), etc. As of FY 2022, the biggest sources of financing were rupee-term loans, followed by taxable Bonds and then external commercial borrowings (ECB)._x000D_ _x000D_ Lending to Railway Companies_x000D_ _x000D_ IRFC also lends funds to various railway sector companies like Rail Vikas Nigam Limited (RVNL), Rail Land Development Authority, Railtel Corporation of India, etc. _x000D_ _x000D_ Leasing Railway Infrastructure Assets_x000D_ _x000D_ IRFC also performs the leasing of railway infrastructure assets along with major projects of the Government of India and lends to other entities under the Ministry of Railways, Government of India (MoR). It employs a cost-plus-lease arrangement with the MoR ensuring a net interest margin for IRFC._x000D_ _x000D_ The company employs a 30-year financial leasing model for financing the rolling stock assets. In the first 15 years, the principal amount is payable, along with the weighted average cost of borrowing plus a margin determined by the MoR. The weighted average cost of borrowing includes costs of hedging against foreign currency and interest rate fluctuations. For the second 15 years, the company charges the Indian Railways a nominal rate. At the end of the lease, assets are typically sold to the MoR for a nominal price._x000D_ _x000D_ As of December 31, 2022, 48.86% of the total loans and advances in IRFC’s loan book were towards lease receivables from MoR, 49.81% of loans and advances were against the lease of railway infrastructure assets and for national projects, and the remaining 1.33% as loans provided to IRCON, RVNL, etc. Financing of rolling stock was the highest source of revenue at around 58% of total revenue as of FY 2022, with interest income coming second at around 33%._x000D_ _x000D_ The company does not have any subsidiary as of March 2023. _x000D_

IRFC Corporate Action

_x000D_ IRFC has not issued any rights shares, buybacks, bonus shares, or stock splits in recent times. _x000D_

Financial Highlights

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• The company has consistently increased its sales revenue every year, from ₹5,550 crore in FY 2013 to ₹23,892 crore in FY 2023, thus increasing by a rough CAGR of 38.77% in this period.
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• Simultaneously, the company has also increased its profitability. Its net profit as a percentage of sales has improved from 10.36% in FY 2013 to 26.52% in FY 2023.
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• As of September 2023, the company has a quick ratio of 15.7x, though it also has an interest coverage ratio of 1.34x.
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_x000D_ Note: All financial risks, such as interest rate risk and exchange rate risk, are passed onto the MoR. IRFC is exempted from the RBI’s asset classification norms, provisioning norms, and exposure norms with respect to its exposure to the MoR.