Skip to main content

IRFC(Indian Railway Finance Corporation)-IPO

IRFC (Indian Railway Finance Corporation)

IPO Details

IRFC IPO will be the first IPO of this year. IRFC intends to raise about ₹4,600 crores through its IPO. The company will raise about ₹3,200 crores through the fresh issue and the government will raise about ₹1,400 crores. After the issue Government will own an 86% stake in the company.



Company Analysis

IRFC is owned by the Government of India. IRFC is registered as NBFC in RBI which directly works for the Ministry of Railways(MOR). IRFC raises funds and manages assets for MoR. IRFC helps in financing all the projects of MoR by taking debt or any other way. IRFC buys assets needed to complete projects of MoR and then it leases the assets to MoR for long period of like 20-30 years. So if IRFC leased some assets to MoR for 30 years, this IRFC may recover the number of assets in 15 years, and in the next 15 years, IRFC generates revenue. IRFC also provides funding to other rail companies like RailTel, Rail Vikas Nigam Limited (RVNL). There are already 4 rail companies (IRCTC, RVNL, RITES, Ircon International) listed on exchanges and IRFC will be the fifth. 

Industry Analysis

IRFC works for railways, so the growth in railways will directly affect the growth of IRFC. 

With ₹102 lakh crore worth of national infrastructure projects in offing, ₹15 lakh crore is expected to be given to the Ministry of Railways.

In FY20, IRFC contributed about Rs 71,000 crore to the Indian Railways CAPEX outlay plan. IRFC hopes to meet 70 percent of the total CAPEX requirement of Railways in FY21. IRFC had disbursed ₹3.4 lakh crores as of March 2020 to Indian Railways. So far in FY21, it has disbursed ₹30,000 crores. The company's AUM as of March 2020 stood at ₹2.66 lakh crores with a net worth of ₹31,000 crores, 13.19 percent return on equity (RoE), and 1.5 percent of return on assets (RoA).

IRFC’s long-term domestic borrowing program was awarded the highest credit rating of 

“CRISIL AAA/Stable”,

“[ICRA] AAA (Stable)” and 

“CARE AAA [Triple A]” by CRISIL, ICRA, and CARE respectively. 

IRFC also got its short-term borrowing program rated, obtaining the highest rating of 

‘‘CRISIL A1+’’, 

‘‘[ICRA] A1+’’, and 

“CARE A1+ [AOne Plus]” by CRISIL, ICRA and CARE.

During the financial year 2019-20, three international credit rating agencies – 

Standard & Poor’s(S&P), Fitch, and Moody’s – have awarded “BBB- with Stable Outlook”, “BBB- with Stable Outlook” and “Baa2 with Negative Outlook” ratings respectively to your Company. 

Besides, the Company obtained an issuer-specific credit rating of “BBB+ with Stable Outlook” from the Japanese Credit Rating Agency

IRFC being a PSU has the advantage of getting debt at low rates of interest as the safety of debt is high. NPAs of IRFC have been 0% since its inception, therefore there has been no default on loan. But IRFC has huge debt in its books, the debt to equity of the company is 9.36 as of 2019. 

Financials

Source: Indian Railway Finance Corporation Limited. Annual Report 2019-20

On y-o-y revenues grew 20%. And the profits increased by an amazing 40%.
The company's revenues grew at a CAGR of 12.17% and net profits increased at a CAGR of 30%. And assets showed a CAGR of 17.28%. And the long-term debt showed a CAGR of 25.76%.

Conclusion

IRFC IPO seems to be attractive as its profits and revenues are growing and when calculated its intrinsic value according to the formula given by Sir Benjamin Graham it says that the company is undervalued. And even the company is associated with the railway sector it has a lot of growth potential and even last year government announced of privatization of Indian Railways so it also opens opportunities for IRFC.

Comments

Popular posts from this blog

What is Nifty 50 and Sensex? How is Nifty 50 Calculated? Which are stocks in Nifty 50?

What is Nifty 50 and Sensex?   Sensex was launched in 1986 by BSE and Nifty 50 was launched on 22 April in 1996. Nifty 50 and Sensex are the indices of India. Nifty 50 represents the top 50 companies of India listed on NSE and Sensex shows represent the top 30 companies of India on BSE. Indices represent the country's stock markets. Almost every having a portfolio in the same market of indices can compare their portfolio returns with indices and even mutual also compare their fund returns with indices. How to Nifty is calculated? Step 1: Calculate IWF(Investible Weight Factors)  IWF is a unit of floating stock available for trading. IWF is total shares minus (addition of shareholding of the promoter, government holding in the capacity o strategic investor, shares held by promoters through ADR/GDRs, cross-holdings by associates or group companies, Employee Welfare Trust and Shares under lock-in category) and the answer is then divided by total shares. For this, an exa...

How to Save Money? for Students

 How to Save Money? for Students For students how to save money has always been a question and not knowing some ways to save money can let us go out of cash. So, to avoid going out of cash you can use some of this way to save some bucks. →Make a budget Guys, sometimes we spend a lot of money than we should and to avoid that extra spending we should make a monthly budget of our expenses which would help you out in figuring out that for what thing how much we need to spend. You can simply just allocate your funds for different purposes and before allocation guys start investing b'cause investing early is more important than investing more. And to simplify making a budget there are various tools available on the Internet which you can use to make your budget and you can even use tools that can track your spending and notify you when you spend more than your budget. The budget also helps you to take a track record of your income and your expenses. And yes do not forget to write or note...

What is REIT(Real Estate Investment Trust)? Should you Invest in It?

What is REIT(Real Estate Investment Trust)? REIT works as mutual funds for stocks in which a firm takes money from investors and from that money they buy real estate properties and manages investors' money. REITs buy properties and lease the properties and collect the rent. Collected rent is distributed among shareholders as dividends. All the small and big investors can buy REITs. The minimum investment amount in REITs is ₹50,000(approx), the amount may vary from REIT to REIT. REITs have also divided their assets into parts called units similar to mutual funds. Properties bought by REITs can be any segment healthcare, apartments, etc. REITs give investors to be part of highly valued real estate properties. Rates of properties are extensively high in cities like Hyderabad, Mumbai, Delhi, etc. these cities being expensive get out of reach of common people so REITs help common investors excess to these properties and become a part of it and take advantage of the growth of real estate...