IRFC IPO Financial Analysis (Subscribe)

Key Highlights

  • IRFC plays a strategic role in financing growth of Indian Railways. Total value of rolling stock financed by IRFC as at 31st March 2020 is Rs 223,810.78 crore
  • Relationship with ministry of Railways enables low risk -cost plus business model.
  • Consistent financial performance over the last three fiscals.
  • Highest credit rating from ICRA, CRISIL and CARE results in competitive cost of borrowings and diversified sources of funding.

Business Profile

IRFC is wholly-owned by the Government of India (GoI) acting through the Ministry of Railways (MoR). The Company is registered with the RBI as a NBFC and are classified under the category of an “Infrastructure Finance Company”.It’s primary business is financing the acquisition of rolling stock assets like example locomotives, coaches, wagons, trucks, flats, electric multiple units, containers, cranes and trollies and leasing of railway infrastructure assets.

Financing targets are determined annually by the MoR based on the annual planned capital outlay contained in the Union Budget of India for Indian Railways which IRFC meets through various sources including taxable and tax-free bonds issuance, term loans from banks/financial institutions, external commercial borrowings, internal accruals, asset securitization and lease financing.

Financial profile

The Company’s revenues are generated from lease income, interest on lease advance, loans, deposits and investments. Revenue from other income comprise dividend from investment in equity shares and other miscellaneous income. IRFC’s financial performance is consistent over the last three fiscals, FY18-FY20. Total revenue increased to Rs 13,421.10 crore in FY20 from Rs 11,133.59 crore in FY19. Total revenue for the H1FY21 is Rs 7,384.83 crore with PAT of Rs 1,887.27 crore.

Assets under management (AUM) have grown to Rs 266,136.99 crore in FY20 from Rs 200,937.33 crore in FY19. For H1FY20, AUM stood at Rs 278,007.59 crore.

Return on net worth has been 10.53% and 11.51% for FY20 and FY19 respectively.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title H1FY21 FY2020 FY2019 FY2018
Total Income ₹7,384.83 Cr ₹13,421.1 Cr ₹11,133.59 Cr ₹921.71 Cr
Net Profit/Loss ₹1,887.27 Cr ₹3,191.54 Cr ₹2,140.00 Cr ₹2,022.26 Cr
Total Assets ₹2,91,986.6 Cr ₹2,75,504.1 Cr ₹2,05,093.6 Cr ₹1,60,027.9 Cr


With EPS of Rs 3.40 in FY20 and NAV of Rs 25.50, P/BV is 1.02 calculated at upper price band of Rs 26 at which shows that the issue is attractively priced. The issuer has no peers as per the RHP for comparison. IRFC has NIL NPAs and enjoys relaxations in various regulatory regimes from the GoI being a systemically important NBFC acting through MoR.


IRFC is a strategically important NBFC, a dedicated market borrowing arm for the Indian Railways. The MoR has made substantial progress in initiating railway infrastructure. The Indian Railways has constantly expanded its network, developed, and grown across various parameters including freight and passenger revenues. CAPEX plans for rail infra includes network de-congestion, high speed rails and elevated corridors, station development to highlight a few.

With the expansion of the freight network and passenger demand, the requirement of rolling stock would increase substantially. The expansion plans of Railways would ultimately benefit IRFC by increasing its primary business. The Union Budgets’ CAPEX for FY21 is proposed to be Rs 1,610 billion for Indian Railways (IR) which is the highest ever allocation for the IR. However, it should also be considered that IRFC has to provide least cost funding to railways so they have to keep a balance in terms of volumes and margins to make the railway projects viable as well as see that margins are not impacted.Considering all the above factors, one might subscribe to the issue.

Reviewer recommends Subscribing to the issue.

Review By CA Priyanka Choudhary on 6th Dec 2020

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Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

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