IRFC - Indian Railway Finance Corporation Share Price

In the recent earnings conference call, management provided an optimistic outlook for Indian Railway Finance Corporation (IRFC). The company has successfully transitioned from a single-client model with Indian Railways to a diversified multi-client approach. For FY 2025-26, IRFC set ambitious targets of sanctioning assets worth INR 60,000 crores and disbursing INR 30,000 crores. As of December 31, 2025, the figures showed significant progress, with sanctions surpassing guidance and disbursements achieving approximately 75% of the targeted amount.

Management highlighted that the margins on the new assets being sanctioned are projected to be 2x to 3x higher than those historically achieved with Indian Railways. They reported successful capital raising efforts, including a loan raised in yen currency and the issuance of zero coupon bonds, reflecting strong demand for IRFC's offerings. The overall outlook includes expectations of steady growth in Profit After Tax (PAT), Net Interest Margin (NIM), and Assets Under Management (AUM) each quarter.

Looking forward, management projected a potential increase in AUM to over INR 5 lakh crores by 2030, driven by a focus on larger, high-quality assets, with 60% coming from Indian Railways and 40% from the broader railway ecosystem. They emphasized a strategic shift, targeting clients with significant funding needs, and the intention to fund 20 new entities with around INR 15,000 crores each over the next five years. The focus on high-rating assets aims to maintain a zero NPA status, supporting the company's growth and stability. The cost of borrowing was reported to be approximately 7%, remaining competitive in the market.

Question 1: "Sir, just wanted to have your explanation for the amount which is appearing in provision and written off as a line item there. It has increased significantly in the current quarter. What is the reason behind it? Because I guess we still don't have any NPA in our books."

Answer 1: "You must be aware about the RBI guidelines. From October 1 onward, whatever assets that we are entering into agreement, there has to be mandatorily some provisioning done. These provisions are simply that"”provisions. They are not NPA. So, the increase is due to standard asset provisions as per the guidelines."

Question 2: "I got the view that this is going to increase on a quarter-on-quarter basis. Any sort of a number or any sort of a growth rate that we can look forward for, let's say, for FY '27 right now?"

Answer 2: "We anticipate positive growth in AUM. We are currently at INR 4.75 lakh crore, and we believe it should hover around INR 5 lakh crore in the near future, aiming to add around INR 3 lakh crore in the next five years through a targeted approach."

Question 3: "Is there a long-term dividend payout policy that investors can anchor to, especially given the company's stable cash flow and nil credit costs?"

Answer 3: "Yes, we have a dividend policy in place. Over the last five years, our dividends have seen a steady increase. This year, our interim dividend was significantly higher than last year, and we expect that as PAT grows, dividends will continue to grow accordingly."

Question 4: "What is the expected execution timeline for INR 17,000 crore exposure where IRFC has emerged as L1? How much of this can realistically flow into FY '27 AUM?"

Answer 4: "Agreements will be signed very quickly, with due diligence already in place. Generally, for a greenfield project, we disburse the total amount in two to three years after signing agreements. This means we expect significant contributions to AUM in FY '27."

Question 5: "Given that we would be among the lowest-priced competitors, what is the reason for us to not win some bids?"

Answer 5: "It's a competitive market where each company submits bids based on their specific strategies. Occasionally, banks get very aggressive with their offers, leading them to win some bids. Nevertheless, our strike rate exceeds 60% in bids we participate in, which is quite favorable."