Indian Railway Finance Corporation Ltd - IPO Note (Not Rated)

Indian Railway Finance Corporation Ltd - IPO Note (Not Rated)

by Nikita Bhoota Last Updated: Mar 13, 2023 - 03:52 pm 71.3k Views
Listen icon

Indian Railway Finance Corporation Ltd.

Issue Opens: January 18, 2021
Issue Closes: January 20, 2021
Face Value: ? 10
Price Band: ?25-26
Issue Size: ~?4,633cr (at upper price band)
Bid lot: 575 Equity shares
Issue Type: OFS & Fresh Issue
 

 

%Shareholding

Pre-offer

Post-offer

Promoter Group

100.0

86.4

Public

--

13.6

Total

100%

100%

Post Issue percentage is at upper price band

Company Background

Indian Railway Finance Corp. (IRFC), registered with RBI as a systemically important NBFC (ND-IFC), is the dedicated market borrowing arm of the Indian Railways (IR). Its primary business is to finance the acquisition of rolling stock, leasing of railway infrastructure assets & national projects of the Government of India (GoI) and lending to other entities under the Ministry of Railways (MoR).

Offer Details:

The total issue size is ?4,633Cr which consist of Fresh Issue of ?3,089Cr and Offer for sale of ?  1,544Cr at the upper end of the price band. The proceeds from the fresh issue are proposed to be utilized towards: 

 

 

  • Augmenting IRFC’s equity capital base to meet future capital requirements arising out of growth in its business; and 
  • General corporate purposes


Financials

 

 

 

 

 

 

 

Particulars (Rs Cr)

FY18

FY19

FY20

1HFFY20*

1HFFY21*

Adj. II (?Cr)

10,729

13,697

18,064

8,621

10,449

NIM (%)

1.8

1.6

1.4

0.8

0.7

Cost to income (%)

1.5

0.8

2.0

0.6

2.9

PAT (?Cr)

2,001

2,140

3,192

1,630

1,887

EPS (?)

3.1

3.3

3.4

1.7

1.6

P/BV (x)

0.8

1.0

1.0

0.9

1.0

ROE (x)

12.3

9.5

11.6

6.4

6.1

ROA (x)

1.4

1.2

1.3

0.7

0.7

Net Gearing Ratio

6.6

7.0

7.7

7.0

7.7

Source: RHP, 5paisa Research, *Ratios and other figures are not annualized and are on pre IPO basis.

Strategic importance to IR:
 
IRFC mainly raises money from the markets (both domestic and / or international) to buy railway assets like rolling stock and finances infrastructure assets. It then leases them to IR over a period of 15-30 years and earns lease rentals in return. IRFC plays a critical role in facilitating priority capex for IR which has been historically lagging, owing to constraints on budgetary support and has been garnering attention over the past 6-7 years, thanks to assistance from Extra Budgetary Resources.

Nil asset quality concerns:
 
IRFC’s gross NPAs are nil as it has entire exposure to MoR or its controlled entities for which the RBI has exempted IRFC from asset classification norms. As per the RHP, the MoR has historically never defaulted in its lease payment obligations which is likely to continue going ahead

Key Risk Factor:

IRFC has significant dependence on IR and MoR for its revenues. Change in capex plans or policies like IR having ability to raise its own funds, detrimental changes to term of agreement, lack of support in terms of ability to raise funds at lower rate or availability of funds are some of the key risk factors impacting the business and result of operation.

Outlook & Valuation: 

IRFC has a low risk model, adequate liquidity & ALM and ability to raise funds at most competitive rates. At the upper end of the price band, IRFC is seeking post IPO multiple of ~1xx 1HFY21 P/BV (~0.6x/0.7x for PFC/REC).

Watch this video to know more about Indian Railway Finance Corporation Ltd IPO

How do you rate this blog?

Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

oda_gif_reasons_colorful

About the Author

Enjoy 0%* Brokerage with 5paisa
Resend OTP
Please Enter OTP
Mobile No. belongs to

By proceeding, you agree to the T&C.

Latest Blogs
Market Outlook for 22 April 2024

Our markets corrected sharply in the week gone by mainly due to uncertainty over global geopolitical tensions and selling by the FIIs which resulted in the index breaking the 22000 mark. However, we witnessed recovery from the low of 21780 in the last trading session and Nifty ended around 22150 with a weekly loss of over one and a half percent.

Stock in Action - Escorts Kubota Ltd

Escorts Kubota Stock Movement of Day    

Weekly Outlook on NATURAL GAS - 19 April 2024

The cost of natural gas saw a 2.7% increase yesterday, closing at 146.90, as projections of limited feed gas demand and milder weather tempered upward momentum. Despite concerns over a significant storage surplus and reduced demand forecasts for the next fortnight, substantial price shifts were notably absent.