Business: Indian Railway Finance Corporation (IRFC) was set up on 12th December 1986 as the dedicated financing arm of the Indian Railways for mobilizing funds from domestic as well as overseas Capital Markets. In more than 30 years of existence, IRFC has played a significant role in supporting the expansion of the Indian Railways and related entities by financing a significant proportion of its annual plan outlay.
The primary objective of IRFC is to meet the predominant portion of ‘Extra Budgetary Resources’ (EBR) requirement of the Indian Railways through market borrowings at the most competitive rates and terms. The Company’s principal business therefore is to borrow funds from the financial markets to finance the acquisition / creation of assets which are then leased out to the Indian Railways.
At the crux of it all, IRFC is a government-owned NBFC that caters to only one client — The Indian Railways and its many subsidiaries.
Objective of the Issue:
- Strategic role in financing growth of Indian Railways
- Consistent financial performance and cost plus model
- Low risk business model
- Company derive a significant amount of our revenue from operations from the Indian Railways. A loss of or reduction in business from the Indian Railways, any direct borrowing by the Indian Railways or introduction of any new avenues of funding by the Ministry of Railways, Government of India (the “MoR”) could have an adverse effect on our business.
Key Ratios / Financials:
- Lease rental is growing @14% CAGR.
- PBT is increasing by @12.5% CAGR.
- EPS Rs 3.40/-
- Retail and Employees were jumping in subscription of IRFC on the first day. GMP is around 1.30/-
- Subscriptions as on the first day, important is to see Employee(EMP) category, they are the best insider of the company 🙂
<Subscribe or Avoid>
Listing Gain / Short term: GMP is not so attractive as of now, I expect low listing gain, but looking at subscription it might increase as well, would recommend applying with low listing gain expectations.
Long term: Looking at the stable financials, low-risk business model and fair valuations, for the long term it’s a good bet and you can apply.