IRFC to now venture into metro projects, says CMD & CEO Manoj Dubey

Will increase NIMs with non-rail funding, project refinancing

Indian Railway Finance Corporation (IRFC), the financing arm of Indian Railways which was recently upgraded to Navratna status, will now look at financing metro projects across the country, Manoj Kumar Dubey, chairman, managing director and chief executive officer (CMD and CEO) said on Wednesday.

 

With the government looking increasingly inward for financing the large-scale infrastructure needs of the country, railways has not been allocated any borrowing legroom for the third straight year in the Union budget for 2025-26.

 

In view of this, the company, which was formed solely to handle the external financing needs of the national transporter, had been looking to expand its remit to railway-aligned projects, called projects with “forward or backward linkages” with Indian Railways.

 

It had also signed an MoU with state-run infrastructure financier IIFC in 2022 for opportunities in this space. Now, the company has been asked by the central government to fund metro projects and is actively working towards developing a plan for it.

 

According to the CMD, who was speaking at a press conference to announce the company’s future plans after it was awarded Navratna status by the central government, IRFC has already secured funding for 20 BOBR rakes for NTPC worth ₹700 crore, and was recently declared the lowest bidder to finance a ₹3,190 crore loan for Patratu Vidyut Utpadan Nigam Limited (PVUNL), a subsidiary of NTPC.

 

“Additionally, NTPC Renewable Energy Limited (NTPC REL), a wholly-owned subsidiary of NTPC Green Energy Limited (NTPC GEL), has accepted IRFC’s bid for ₹7,500 crore to finance a Rupee Term Loan against its Request for Proposal. IRFC is also actively exploring opportunities to fund rolling stock requirements for Indian Railways customers, container train operators, renewable energy needs of Indian Railways, Metro Rail projects, port rail connectivity, and PPP projects sanctioned by Indian Railways,” Dubey said.

 

Moreover, IRFC which operates on a net interest margin of 35-40 basis points (bps), will now look at nearly quadrupling it to 150-200 bps as it enters segments and borrowers where it can operate on a higher interest margin.

 

While the company’s top line and bottom line will see an expansion, senior executives present at the event said that profit after tax numbers will grow even faster as the company’s cost of borrowing is among the lowest in Indian NBFCs.

 

“It is true that there are concerns that exposure to non-sovereign-backed segments will also increase the cost of borrowings for us, but currently, we are not looking to go beyond high quality assets or any promoter with a subpar credit rating. We’ll still continue to aim mostly for AAA rated assets,” said a senior executive.

 

Additionally, the company will also look at refinancing loans from multilateral institutions such as the World Bank, another senior executive said on the sidelines of the event.

 

Multilateral loans are primarily dollar-denominated, and the recent volatility in currency exchange rates may have prompted the move. 

In Indian Railways, among others, the dedicated freight corridor project has been extensively financed through a World Bank loan of $2735 million, although the executive did not clarify whether IRFC is specifically looking at a refinancing prospect in the project.