IRFC profits nearly doubled under outgoing CMD Amitabh Banerjee

Amitabh Banerjee, the chairman and managing director of Indian Railway Finance Corporation (IRFC), was divested of his duties after allegations of corruption surfaced last week. There are also concerns of vigilance oversight in his appointment.

During Banerjee’s tenure, IRFC’s revenue from operations rose by 51 per cent between 2019-20 and 2020-22, jumping to Rs 20,302 crore. The profit of the company nearly doubled to Rs 6,090 crore.

Though the company had been steadily growing before Banerjee joined, posting a profit of Rs 2,045 crore in 2017-18 and 2,254 crore in 2018-19, higher infrastructure financing requirements by the Railways and the global economic situation saw the company grow at a much faster pace during his tenure.

Banerjee joined IRFC in 2019 after serving as the director of finance at Konkan Railways. He took charge as the managing director shortly before the Covid-19 pandemic arrived, and was made chairman after a probation period.

A disclosure made by the company to the Securities and Exchange Board of India (Sebi) said Banerjee had been replaced by Shelly Verma, the director of finance at IRFC, with immediate effect until further orders.

“The removal of Banerjee from his duties was the consequence of an internal complaint earlier, which was being probed by the railway board for some time now,” an official familiar with the matter said. The probe reportedly covers allegations of personal expenses billed to the company on numerous occasions.

IRFC is a non-banking finance company responsible for providing low-cost finance to the Indian Railways. The company was created in 1986 as a measure to boost extra budgetary resources (EBR) for infrastructure development of the railways, as higher government budgetary allocation has a negative impact on the fiscal deficit.

Banerjee was at the helm of the company during an uncertain financial environment ravaged by Covid-19. However, his tenure was also marked by quantitative easing by most major central banks across the globe, which saw higher liquidity in the economy and lower cost of financing. For most of his tenure, the Reserve Bank of India kept an accommodative stance in its monetary policy.

The cost of finance, which can be seen through the weighted average cost of borrowing for the company, reduced by 95 bps to 6.42 per cent in the last fiscal year. Senior officials at the company said its low-risk status and a mix of foreign and domestic assets allowed it to keep its borrowing cost low.

Meanwhile, the company’s assets under management (AUM) grew from Rs 2.66 trillion to Rs 4.15 trillion during Banerjee’s, marked by a higher finance demand from the Railways in 2020-21, which rose sharply to Rs 1.04 trillion.