IRFC Nov-24 Conf call

Indian Railway Finance Corporation (IRFC) currently lends with a margin of 35-40 bps on railway projects.

IRFC intends to expand its lending activities to include infrastructure beyond railways.

IRFC plans to offer very attractive rates in its new markets.

IRFC anticipates maintaining high profit margins even after expanding into new markets, leading to strong profitability.

IRFC aims to become a significant infrastructure funding provider in India, similar to PFC and REC.

REC and PFC have a cost of funds of approximately 7-7.2%, and lend at around 9.5%.

IRFC exploring how to gain market share from other NBFCS in infrastructure funding in a highly competitive market.

IRFC's railway lending is considered to have a very low risk of non-payment.

IRFC has the lowest cost of capital in the market, allowing them to offer competitive lending rates.

IRFC is expanding its lending beyond railways, looking at infrastructure projects like logistics.

IRFC wants to become a significant infrastructure lender, competing with established players like PFC and REC.

Railway disbursement happens in the same fiscal year, while other infrastructure projects can take longer, resulting in a delayed revenue stream.

Railway lending is considered risk-free due to the government's involvement and reliable payments.

IRFC aims to achieve high growth in non-railway segments given their low existing exposure, leading to potentially very high CAGR.

IRFC's low cost of capital enables them to offer attractive lending rates, attracting borrowers and increasing their market share.

IRFC plans to begin lending outside of railways from the next fiscal quarter onwards.

IRFC's primary responsibility is to provide funding to the Ministry of Railways (MoR), which is essential for railway projects.

IRFC's funding to the MoR continues despite the possibility of new areas of investment, ensuring the railway projects continue to receive support.

The revised estimate is a government budget update that occurs in January, where adjustments to the current financial year's spending are considered.

Any additional funding from the GoI (Government of India) for IRFC will only be disbursed in the final quarter (Q4) of the financial year.

IRFC's partnership with NTPC involves a leasing model, similar to the one used for railway projects, but for a 15-year period.

The contract between IRFC and NTPC is worth ₹700 crore, marking IRFC's first foray into leasing infrastructure beyond railways with NTPC.

This partnership is innovative as it involves IRFC providing funding for NTPC through a leasing model, a departure from typical lending practices.

The first phase of the NTPC deal includes the delivery of 20 rakes, which are sets of railway wagons used for carrying cargo.

Indian Railway Finance Corporation (IRFC) primarily provides funding for railway projects, currently relying heavily on government funding.

IRFC aims to expand its lending activities beyond railways to include other infrastructure sectors, capitalizing on its strong balance sheet and net worth.

IRFC expects to maintain strong profitability even after diversifying into other sectors by leveraging its competitive lending rates and aiming for a higher profit margin.

IRFC's funding is currently heavily reliant on government allocations, with the company expecting clarity on its budget allocation for the next financial year.

IRFC expects government budget allocations for the current financial year (FY) to be announced in January, with allocations for the following FY expected in February.

IRFC aims to position itself as a major lender to infrastructure projects, contributing to India's national infrastructure pipeline goals.

IRFC earns a higher profit margin on projects outside of the railway sector compared to railway projects.

Indian Railway Finance Corporation (IRFC) doesn't require any additional capital for growth, as they are comfortable with their current financial position.

IRFC has a strong team that specializes in assessing the financial viability of projects, which is especially important as they expand into new industries.

IRFC has a proven track record in railway lending, with experience in public-private partnerships and working with global companies like General Electric and Alstom.

IRFC is actively developing its appraisal team to evaluate projects outside of the railway sector, aiming to expand into lucrative infrastructure projects.

IRFC's net worth has increased significantly, surpassing 50,000 crores, demonstrating their strong financial position.

IRFC is not concerned about needing more equity capital, as they are confident in their strong financial base.

IRFC's railway lending typically carries a margin of 35-40 basis points (bps), meaning they make a small profit on each loan.

IRFC utilizes a 'cost-plus' model for their lending, where they add a margin to their cost of funds to determine the lease rental. This margin covers their costs and risks.

IRFC passes on risks related to interest rate fluctuation, currency exchange rate fluctuation, and other relevant business risks to their borrowers.

IRFC maintains a low margin on their lending to the railways, aiming to be insulated from market fluctuations and ensuring stability in earnings.

IRFC's lending to the railways is considered low-risk due to the stable and predictable revenue stream from the government, which is the major borrower.

IRFC's cost of funds is determined by the interest rates they pay on various sources of financing, including borrowings and ECBs.

IRFC calculates their lease rentals by adding a margin to their cost of funds, which is determined by various factors like borrowing rates and risks.

IRFC's lending rate can be fixed or variable depending on the type of borrowing used to fund the project. If IRFC borrows at a floating rate, the lease rate will also be variable.

IRFC's lending model aims to ensure consistent profitability while maintaining a lower margin, reducing their exposure to market fluctuations, ensuring stability in earnings.