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Writer's pictureAmit Pandya

Indian Railway Finance Corporation

Again and again, I come to see the importance of psychology in capital markets. All over the world, mostly economy is hit badly on ground level but the stock markets are running like crazy and I always quote my favourite Mr Warren Buffet that it is only when the tide goes out we come to know who is swimming naked! IPO market since the ending of 2020 has become a type of casino or lottery were stocks are utterly overpriced as well as also the loss-making companies are hitting high and high. Also, some so-called self-acclaimed experts who themselves are sitting in negative portfolios are encouraging newbies to become the food of the market. For your own good financial health never follow the road of making quick bucks in low volume or never heard before companies. Always stay away from free things in Capital Markets.


Now let's start talking about IRFC.

The dedicated market borrowing arm of the Indian Railways and are wholly-owned by the Government acting through the MoR and registered with the RBI as an NBFC-ND-IFC. Our primary business is financing the acquisition of Rolling Stock Assets and Project Assets of the Indian Railways and lending to other entities under the MoR. Over the last three decades, we have played a significant role in supporting the capacity enhancement of the Indian Railways by financing a proportion of its annual plan outlay.


Summary of Industry

The Indian Railways is the largest rail network in Asia, running approximately 13,452 trains every day to transport approximately 22.70 million passengers per day in Fiscal 2018 (Source:

http://indianrailways.gov.in/railwayboard/view_section_new.jsp?lang=0&id=0,1,261 and Indian Railways - Year Book 2017-18, Ministry of Railways). The MoR has made substantial progress in initiating infrastructure creation. The Indian Railways has planned to borrow `2.50 trillion from IRFC to fund its proposed capital expenditure from Fiscal 2016 to Fiscal 2020 (Source: Ministry of Railways). In particular, the MoR has indicated its intention to borrow `554.71 billion from IRFC in Fiscal 2020 (Source: Ministry of Railways).




Set up as a public limited company in December, 1986 with the sole objective of raising money from the market to part-finance the plan outlay of Ministry of Railways and for meeting their developmental needs, IRFC has been successfully meeting the borrowing targets set for it year after year. Funds are raised through issue of bonds, 54 EC Capital Gain Bonds, Term loans from banks/financial institutions and through external commercial borrowings/export credit etc. The Department of Public Enterprises has consistently rated the Company as “Excellent” for its performance vis-à-vis the parameters set cut in the MOU. The Company has leased rolling stock assets worth `1,95,626 crore to the Railways upto 31st March, 2019. Rolling Stock assets worth about `25,637 crore were financed during 2018-19. Funding has been made by IRFC in locomotives, wagons and coaches. The acquisition has helped in increasing traffic output and revenue growth in Indian Railways over the years. IRFC has also funded Railway projects through Institutional Finance to the extent of `58,715 crore till 31st March, 2019. Besides, IRFC has funded National Projects worth `5,079 crore. Rolling Stock assets funded by IRFC are leased to Ministry of Railways. IRFC has successfully brought down lease rentals from 17.5% p.a. in 1996-97 to 11.208% p.a. in 2018-19 which compares favourably with the borrowing of the Government of India. The Ministry has been making lease payments to IRFC regularly. The Company has also disbursed loans amounting to `4,327.43 crore to Rail Vikas Nigam Ltd. (RVNL) till the end of fiscal year 2018-19 for development of Railway Projects. IRFC has consistent profit earning track record. It has so far paid `3,324 crore as dividend to the Government. Based on its strong financial strength and credit standing, it has got the highest possible rating from three prominent domestic Credit Rating Agencies and investment grade at per with ‘Sovereign’ from four major International Credit Rating Agencies.


The stock is priced at a price band of Rs.25-26 and it can be an opportunity for the people with long-term investing mindset. You cannot expect to perform Govt. companies shares like private entities because the majority stake is held with the Govt. or its agencies and you cannot expect any manipulation in it. Market respects high earnings and growth prospects which is lacking in here. And also in the benefit of the population of India at large Govt. agencies aren't profit-making entities like private they are there for the welfare of the people.

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