IRFC m-cap zooms past Shriram Finance, IDBI Bank; stock up 62% in 1 month

Currently, Indian Railway Finance with Rs 68,086 crore m-cap stood at 86th position in overall ranking, ahead of Shriram Finance (Rs 67,613 crore) and IDBI Bank (Rs 67,310 crore), the BSE data shows.

Shares of state-owned Indian Railway Finance Corporation (IRFC) hit a new high of Rs 52.71, gaining nearly 4 per cent in Wednesday’s intra-day trade on the BSE in an otherwise subdued market backed by heavy volumes. Till 11:20 AM; a combined 121 million equity shares representing 0.93 per cent of total equity of IRFC had changed hands on the NSE and BSE. In comparison, the S&P BSE Sensex was down 0.18 per cent at 65,282.

In past one month, the stock price of IRFC has appreciated by 62 per cent, as compared to 2 per cent decline in the benchmark index. A sharp rise in market price of IRFC has helped the company surpass private non-banking finance firm, Shriram Finance, and private sector bank, IDBI Bank, in market capitalisation (m-cap) ranking.

Currently, IRFC with Rs 68,086 crore m-cap stood at 86th position in overall ranking.  While, Shriram Finance and IDBI Bank m-cap stood at Rs 67, 613 crore and Rs 67,310 crore, respectively, the BSE data shows. The state-owned Punjab National Bank (PNB) from the financials is ahead of IRFC, with a m-cap of Rs 68,147 crore.

IRFC’s principal business is to borrow funds from financial markets to finance the acquisition/creation of rolling stock/project assets, which are then leased out to the Indian Railways as a finance lease. IRFC is a Schedule ‘A’ Public Sector Enterprise under the administrative control of the Ministry of Railways (MoR). It is also registered as a systemically important non-deposit taking non-banking financial company (NBFC-NDSI) and an infrastructure finance company (NBFC-IFC) with the Reserve Bank of India (RBI).

IRFC is exempted from the RBI’s asset classification norms, provisioning norms, exposure norms to the extent of direct exposure on MoR and is not required to pay ‘minimum alternate tax’ with effect from fiscal 2020.

IRFC has played a significant role in supporting the expansion of the Indian Railways and related-entities by financing a significant proportion of its annual plan outlay.

On July 27, IRFC signed a Memorandum of Understanding (MoU) with RITES to strengthen cooperation in financing & development of Railway Infrastructure Projects. The MoU aims to identify mutual areas of collaboration with IRFC’s to provide financial assistance to projects/ institutions that have backward and or forward linkages with Railways.

With the MoR being the sole counterparty to IRFC on its own and through other public sector undertakings Ircon International and Rail Vikas Nigam (RVNL) under its direct purview, IRFC’s loan book has maintained superior asset quality indicators and a low credit risk profile. The company enjoys strong financial flexibility by virtue of its sovereign ownership, ICRA said in rating rationale.

Strong growth prospects, given the Government's focus on infrastructure creation, could lead to an increase in the company’s borrowings. By virtue of its mandate, IRFC has high credit concentration with its business growth significantly dependent on the MoR’s expansion plans for the Indian Railways. ICRA expects IRFC to maintain a dominant share in the MoR’s increasing requirement for funding rolling stock, given its quasi-sovereign franchise and demonstrated ability to mobilise funds at competitive rates.