IRFC Ltd. IPO Note – Brief Overview

Issue Highlights

Indian Railway Finance Corporation (IRFC), the financing arm of Indian Railways is all set to hit the primary markets to raise INR 4,633.3 crores through IPO. This issue will constitute of up to 13.64% of the post issue paid-up equity share capital of the company.

The issue includes a reservation of equity shares worth INR 50 lakh for subscription by eligible employees.

Strengths

  • Monopoly in the market
  • Experienced management team
  • Stable growth in revenue stream
  • Great credit ratings: CRISIL – AAA/A1+, ICRA – AAA/A1+, and CARE – AAA/A1+. (Long term / short term)
  • Key role in Indian Railways growth

Valuation

The company is getting listed at 12 months trailing P/E of 14.2 at upper price band. As IRFC has monopoly in the market, it can’t be compared to other NBFCs.

Utilization of Funds

Background highlights of the company in brief

  • Indian Railway Finance Corporation (IRFC) is a financing arm of Indian Railways. It was incorporated on 12th December, 1986 as a wholly owned Government entity.
  • IRFC is a Schedule ‘A’ Public Sector Enterprise under the administrative control of the Ministry of Railways, Government of India. It is also registered as Systemically Important Non–Deposit taking Non-Banking Financial Company (NBFC – ND-SI) and Infrastructure Finance Company (NBFC- IFC) with Reserve Bank of India (RBI).
  • Its principal function is to raising and acquiring funds for Indian Railways to attain rolling stock assets like wagons, coaches, electric units, trucks, locomotives). It also looks after financing for the company’s improvement, expansion, and assets management.
  • IRFC also has a presence in lending activities and has been lending to various entities in Railway sector like Rail Vikas Nigam Limited (RVNL), Railtel, Konkan Railway Corporation Limited (KRCL), Pipavav Railway Corporation Limited (PRCL) etc.
  • IRFC funds about 79 per cent of the railways’ wagons, coaches and about 85 per cent of engines that make up the rolling stock.
  • IRFC’s has also been diversifying its borrowing portfolio in terms of instruments, markets and investors which has led to the Company, meeting the targeted borrowings year after year, through issue of both taxable and tax-free bonds, term loan from banks/financial institutions besides off shore borrowings, at competitive market rate.
  • The total value of Rolling Stock Assets financed by IRFC for the year 2019-20 was 33,544 Crs.
  • The company has maintained the highest possible credit ratings for an Indian issuer both for long term domestic and short term borrowings and have received the highest credit ratings from CRISIL – CRISIL AAA and CRISIL A1+, ICRA – ICRA AAA and ICRA A1+, and CARE – CARE AAA and CARE A1+, respectively.
  • In Fiscals 2017, 2018 and 2019 (revised estimate), the company was responsible for financing 72%, 93% and 82%, respectively, of the Indian Railway’s total rolling stock.

Briefing about directors & key managerial personnel

Briefing Financials

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