You are here: Home » Companies » News
Business Standard

Indian Railway Finance Corp's IPO will not dent govt support: S&P Global

S & P Global Ratings has said that Indian Railway Finance Corporation's (IRFC's) initial public offering does not alter its view of government support to the company

Indian Railways | IPOs | S&P global Ratings


IPO, shares, company, firms, market
Representational Image

S & P Global Ratings has said that Indian Railway Finance Corporation's (IRFC's) initial public offering does not alter its view of government support to the company.

The government, which has been the sole owner of IRFC since its inception in 1986, holds about 86 per cent shares after the listing. In the IPO exercise, the government sold 5 per cent stake and additional 10 per cent shares were issued to the market.

"The divestment does not affect our assessment of IRFC's critical link and integral role to the government. The IPO plans were announced as far back as 2017 and we had factored the potential share sale in our ratings on the company since then."

S & P said it continues to see an almost certain likelihood of extraordinary government support for IRFC in the event of financial distress. There is no change to the company's business model and it remains the sole financing arm of the Ministry of Railways.

IRFC will remain integrally linked to the government. The government exercises tight supervisory control by driving strategic decisions and appointing IRFC's senior management as well as board members.

The company's borrowing targets and Ministry of Railways lease rental expenditure are set by the government in its Budget which is approved by Parliament.

The Securities and Exchange Board of India requires a promoter to bring down its holdings in three years to at least 75 per cent from the date of listing.

"We believe this will still allow the government to maintain strong control over IRFC. However, should the part-privatisation result in a change in IRFC's business model, it will materially affect the company's creditworthiness through a diminished role or link with the government," said S & P.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Tue, February 02 2021. 10:58 IST