Indian Railway Finance Corporation (IRFC), the financing arm of the Ministry of Railways, is looking to expand scope of lending beyond Railway projects. Over the last five-six quarters (FY24 and 6M FY25), disbursals to the Ministry have been zero; following which the company is now looking at expansion.
A strategy is being worked out for likely implementation next quarter onwards and the company has already begun lending for “backward and forward linking railway projects” of other CPSEs.
Budget documents show market borrowings of IRFC as negligble. IRFC’s borrowings are used to buy locomotives, wagons and coaches and fund projects.
In FY23, the NBFC’s disbursal to Railways was nearly ₹5 lakh crore – the highest by any NBFC. The average disbursals to Railways, pre-FY23, was in the range of ₹60,000 crore.
According to Manoj Kumar Dubey, Chariman and Managing Director, IRFC Ltd, the company will “augment(ing) its core competence” and leverage the balance sheet strength “to make very attractive funding available to all sectors as per our mandate and MoU”.
“...company is making concrete plans and roadmap for renewed lending structure, not limiting itself to railways directly but also to the backward and forward linkages in railways and logistics ecosystem which covers almost everything in infra sector,” Dubey told investors during a recent earnings call.
“If we talk about port also.... doing something with the logistics will come in our purview of memorandum of article,” he added.
The CMD mentioned that going forward the company has already started looking towards other entities who are having forward and backward linkages with the railways and the logistics sector.
“We are entering into arrangement to fund NTPC for purchase of their wagons which they use in the railway system for their coal logistics,” Dubey said. The finance lease is valued at ₹700 crore and the Board has approved financing of 20 bogie open bottom rapid (BOBR) rakes under General-Purpose Wagon Investment Scheme.
“Similarly, there is everything including even the hotel construction which is linked with the railway tourism which we can fund,” he added.
Lending Margins
Dubey explained that expanding beyond disbursals to Railways will likely lead to an improvement in margins. At present, lending to the Railways is with a margin of 35-40 basis points; and once expansion to other sectors happen, these are likely to go up.
Right now, IRFC has zero NPAs (non performing assets).
“Once we go out (expand to other sectors) obviously to the lucrative market ...are there for us also to grab. And surely we are going to move out apart from the railway funding to the other sectors from next quarter onwards,” Dubey reiterated.
Financials edge up
For H1 FY25, the net interest margin (NIM), annualised was 1.39 per cent, while return on equity (annualised) was 12.97 per cent. The company’s net gearing ratio was 7.83x. Assets under management was at ₹462,282.60 crore; and total debt was ₹403,106.24 crore. Net worth was ₹51,464.12 crore.
Profit in H1 FY25 was ₹3,189.45 crore, up 3 per cent y-o-y; while revenue from operations grew 1.71 per cent y-o-y to ₹13,664.97 crore (₹13,434.90 crore). Net interest income increased 4.37 per cent y-o-y to ₹3,224.32 crore.
“The balance sheet strength and my net worth strength give me lot of leg room to start looking at the quality assets in all the infrastructure,” Dubey added.