IRFC - Indian Railway Finance Corporation Share Price

In the earnings conference call held on April 29, 2025, the management of Indian Railway Finance Corporation (IRFC) provided an optimistic outlook for the future, highlighting several key forward-looking points.

The profit after tax, net worth, earnings per share (EPS), and debt-equity ratio all showed steady improvement, while the Assets Under Management (AUM) stood at INR 4.6 lakh crores. Management announced a significant shift in business strategy, moving from servicing a single client"”Indian Railways"”to expanding services to multiple clients within the railway ecosystem. This change is expected to drive growth through lower overhead costs and access to less expensive funding sources.

For FY '26, the company has received an initial sanction for INR 60,000 crores in borrowing and has already completed loan transactions exceeding INR 14,000 crores in the first four months of FY '26. Management emphasized that their approach focuses on securing high-quality, A-plus rated assets, minimizing Non-Performing Assets (NPA) risk.

The management is also eager to engage in Public-Private Partnership (PPP) projects as budget announcements point to new opportunities in this space. There's an expectation that their diversified business model will yield significant growth, with the company poised to leverage a market size estimated at INR 2.5 lakh crores associated with linked projects.

Additionally, management indicated that while the AUM may fluctuate due to repayments (estimates range between INR 10,000 crore to INR 20,000 crore annually), the focus remains on disbursements and loan sanctions as key growth indicators. Management remains confident that the new direction heralds a future of risk-free business expansion, which aligns with their strategic vision as they aim to achieve Maharatna status in the near future.

Questions and Answers from the Earnings Transcript

Question 1: "For FY '26, how should we look at our disbursement number as well as AUM growth? Can we go into non-rail link financing?"

Answer: We are currently bound by our Memorandum of Association, which allows financing only to projects with rail linkages"”this market is worth INR 2.5 lakh crores. For FY '26, our board has approved an initial borrowing of INR 60,000 crores. In April alone, we've disbursed INR 5,000 crores. We will clarify our growth outlook in Q2 or Q3. Ultimately, if we reach INR 30,000 crores disbursed, it rivals what we would achieve solely through Indian Railways.

Question 2: "Do we expect our AUM to increase next year, or will it decline because of rundown from existing loans?"

Answer: The critical indicator is disbursements and sanctions. Increased disbursement will positively impact AUM. If we continue sanctioning and disbursing loans effectively, AUM should show improvement. Thus, our focus remains on these metrics rather than just AUM, which is a culmination of both.

Question 3: "What enables us to win projects? Is it just our access to cheaper rates?"

Answer: We have multiple competitive advantages. Our operational costs are exceptionally low, less than 0.1%, and we maintain a high capital adequacy ratio. Having a single client gives us exposure flexibility. Combined with rapid turnaround times, these factors contribute to our competitive edge, not just low rates.

Question 4: "What refinancing opportunities are we exploring, and how much are we looking at?"

Answer: We're excited about refinancing possibilities, as winning bids leads to instant disbursements. While I can't disclose specific project names yet, many refinancing opportunities are in the pipeline. Given our competitive lending costs, we expect to achieve better margins than with Indian Railways.

Question 5: "Have you completed any refinancing in Q4?"

Answer: Not yet; refinancing projects are in progress. There's interest in several bids, but we won't discuss specifics until agreements are in place. The disbursements will commence instantly once we've won those bids.

Question 6: "Can you quantify cumulative sanctions received apart from Indian Railways?"

Answer: Over the past 40 years, we've worked primarily with Indian Railways. Since diversifying began in Q4 last FY, we've successfully sanctioned INR 14,000 crores.

Question 7: "When can we expect disbursements from these sanctioned amounts?"

Answer: We expect most disbursements to happen this FY. The turnaround for project financing is swift, especially with the renewals we've done, despite some agreements allowing for up to two years for complete disbursement.

Question 8: "What should we expect in terms of AUM repayments for FY '26 and FY '27?"

Answer: AUM repayments will be stable, mainly due to our 15-year repayment structure with Indian Railways. You can expect around INR 10,000 to 20,000 crores annually in repayments during this timeframe.