The Future of Indian Railway Finance Corporation (IRFC) Shares

Indian Railway Finance Corporation (IRFC) is a public sector undertaking (PSU) under the Ministry of Railways. It was established in 1986 as a dedicated market borrowing arm of Indian Railways. The company is responsible for raising funds through capital markets to finance Indian Railways’ expansion plans and operational expenses. Over the years, IRFC has emerged as a leading player in the Indian debt market, with a diverse investor base comprised of banks, financial institutions, and retail investors. IRFC’s shares were listed on the stock exchanges in January 2021. The IPO was a resounding success, with the issue being oversubscribed by more than three times.

IRFC’s Performance Since Listing

IRFC’s shares listed on the Indian stock exchanges on January 29, 2021, at a price of INR 25. As of September 30, 2021, IRFC’s share price stands at INR 24.05. This represents a decline of 3.8% since the listing date. The total market capitalization of the company as of September 30, 2021, stands at INR 26,397 crores.

The past few months have been challenging for IRFC. The COVID-19 pandemic has severely impacted the Indian economy, including the railways sector. The company’s net profit for the first quarter of FY 2021-22 was INR 216.02 crores, a decline of 6.7% compared to the same period last year. Despite this, the company’s asset quality remained robust, with gross non-performing assets (GNPAs) at 0.99% as of June 30, 2021.

The decline in IRFC’s share price since listing is not unique to the company. The broader market has also been facing headwinds, with the BSE Sensex declining by 4.4% since the beginning of the year. The recent announcement of the U.S. Federal Reserve’s tapering of its bond-buying program has also led to a sell-off in emerging market equities, including India.

Factors That Could Drive IRFC’s Future Share Price

Despite the headwinds, there are several factors that could drive IRFC’s future share price.

Firstly, the railways sector is crucial to India’s economic growth, and Indian Railways is the largest rail network in Asia and the second-largest in the world. IRFC’s role in financing Indian Railways’ expansion plans and operational expenses puts it in a unique position, with a long-term growth trajectory.

Secondly, the Indian government’s focus on infrastructure development, including railways, is expected to drive demand for IRFC’s services. The government’s budget allocation for Indian Railways for FY 2021-22 is INR 1.10 lakh crores, the highest ever.

Thirdly, IRFC’s strong credit rating and diversified investor base make it an attractive investment opportunity for domestic and international investors. The company has a credit rating of AAA from CRISIL, CARE, and ICRA, indicating the highest degree of safety regarding timely servicing of financial obligations.

Fourthly, the company’s financials remain strong despite the pandemic-induced challenges. IRFC’s net worth as of June 30, 2021, stood at INR 37,301 crores, and the company’s debt-equity ratio was 7.14.

Conclusion

IRFC’s shares have faced headwinds since listing, primarily due to the broader market’s challenges and the COVID-19 pandemic’s impact on the railways sector. However, the company’s long-term growth potential, the government’s focus on infrastructure development, and its robust financials make it an attractive investment opportunity for investors.

Investors must keep a long-term perspective while investing in IRFC’s shares, given the company’s role in financing Indian Railways’ expansion plans and operational expenses. IRFC’s shares have the potential to deliver significant returns over the long term, given the long-term growth prospects of the railways sector and its positioning as a leading player in the Indian debt market.