Tag Railway Stocks

IRFC Ltd
IRFC Share Price Crashes 50% from Peak, Hits 52-Week Low– Will It Drop to ₹100?

Business and Industry Overview: 

Indian Railway Finance Corporation (IRFC) is the finance company of Indian Railways. It was started in 1986 to arrange money for railway projects. The company helps Indian Railways buy trains, coaches, and wagons. It also gives money for building railway infrastructure. 

IRFC borrows money from banks, bonds, and other sources at low-interest rates. It then lends this money to Indian Railways at a small profit. This helps railways grow without money problems. 

IRFC has strong finances and earns steady profits. Since it is owned by the Indian government, it is a safe company to invest in. It also pays regular dividends to its investors. 

The Ministry of Railways controls IRFC, and the Government of India owns most of its shares. IRFC supports high-speed rail, electrification, and railway expansion. Its growth depends on government spending on railways. The company plays a big role in modernizing Indian Railways while keeping costs under control. 

Since IRFC is a public sector company, it is controlled by the Ministry of Railways. The Government of India holds the majority stake, making it a safe investment option for long-term investors. The government’s continued focus on railway modernization and expansion ensures that IRFC will remain financially strong. 

Potentials: 

The Indian Railway Finance Corporation (IRFC) has a strong future. The government is improving railways with better trains, faster travel, and new tracks. IRFC will raise more money through bonds, loans, and foreign investments. It will also finance big railway projects like high-speed trains, freight corridors, and logistics parks. IRFC helps Indian Railways buy new trains, coaches, and wagons. It is also working on solar and wind energy to make railways eco-friendly. The company wants to offer better services to investors and lenders. It is also training employees for better management. Since 2011-12, IRFC has funded many railway projects. It will continue supporting railway growth in the future. With government support and steady profits, IRFC will help Indian Railways grow and improve. 

Latest Stock News: 

Indian Railway Finance Corporation (IRFC) has seen a sharp decline in its stock price, dropping nearly 50% from its peak of ₹229 over the past six months, with the latest close at ₹119.98 on February 14, 2025. The stock is trading below moving averages, indicating a bearish trend, with an upper circuit limit of ₹132.39 and a lower circuit limit of ₹108.32. The decline is due to sector challenges, reduced funding requests from Indian Railways, and IRFC’s shift towards new lending areas like logistics and urban mobility. Despite having a strong financial base with a market capitalization of ₹1,46,916 crore, experts believe the stock may fall further if it breaks the ₹96 support level. While some analysts see resistance at ₹130-₹132, Moneycontrol experts recommend selling IRFC shares as it remains in a negative trend with oversold technical indicators. Given the heavy selling pressure on mid and small-cap stocks, investors are advised to exit for now and reconsider entry once the stock stabilises. Always consult a financial expert before making investment decisions. 

Analyst Insights: 

  • Market capitalisation: 55,744 Cr. 
  • Current Price: ₹ 343 
  • 52-Week High/Low: ₹ 768 / 341 
  • P/E Ratio: 7.56 
  • Dividend Yield:3.06 % 
  • Return on Capital Employed (ROCE): 17.7 % 
  • Return on Equity (ROE): 18.0 % 

Oil India Ltd (OIL) is currently trading at ₹343, near its 52-week low of ₹341, with a market capitalization of ₹55,744 Cr. It has a low P/E ratio of 7.56, indicating undervaluation, and offers a stable dividend yield of 3.06% with a payout ratio of 30.8%. The company shows strong profitability with an ROCE of 17.7% and ROE of 18.0%, making it attractive for long-term investors. However, concerns include extremely high debtor days (3,557 days), a low interest coverage ratio, and significant debt, which raises financial risks. Additionally, possible capitalization of interest costs needs closer examination. The stock is in a downward trend, indicating weak sentiment in the short term. Given the financial risks and technical weakness, a Sell recommendation is advised for the short term, while long-term investors may consider holding if the company improves its cash flow and debt position. Existing investors should monitor receivables and debt closely before making further commitments. 

IRFC Q2 FY24 Results
IRFC Q2 Results: Revenue Rises 2%, Profit Up 4% YoY; Declares ₹0.8 Dividend per Share

Company Overview

Indian Railway Finance Corporation Limited (IRFC) was incorporated on December 12, 1986, as a Public Limited Company dedicated to supporting the financial needs of the Indian Railways. After receiving a Certificate of Commencement of Business on December 23, 1986, IRFC was classified as a Public Financial Institution in 1993 and later registered with the Reserve Bank of India (RBI) in 1998 as a non-banking financial institution. Over time, it evolved into a non-deposit accepting asset finance NBFC in 2008 and was subsequently reclassified as an NBFC-ND-IFC (Infrastructure Finance Company) by the RBI in 2010.

IRFC, under the administrative control of the Ministry of Railways (MoR), operates as the dedicated financing arm of the Indian Railways, securing funds from both domestic and international markets to finance its growth. Since inception, it has been crucial in funding rolling stock acquisitions and railway infrastructure projects for Indian Railways and related entities like Rail Vikas Nigam Limited (RVNL) and IRCON.

The President of India, through the MoR, holds 86.36% of IRFC’s equity, with the remaining 13.64% owned by public shareholders, highlighting the company’s strategic importance. IRFC’s primary business is to borrow funds and finance assets that are leased to Indian Railways on long-term finance leases. It focuses on acquiring rolling stock assets—such as locomotives, coaches, wagons, containers, and cranes—and leasing infrastructure projects, thus ensuring steady financing for expansion and modernization. The leasing model typically spans 30 years, divided into a primary 15-year period where IRFC recovers the principal and borrowing costs, followed by a secondary 15-year period at a nominal lease rate.

In the 2020-21 fiscal year, IRFC financed a substantial 67.43% of Indian Railways’ capital outlay (Rs. 1,55,161 crore), contributing Rs. 1,04,369 crore to infrastructure needs, highlighting its pivotal role in India’s rail infrastructure. Notably, IRFC also supports initiatives like the Gati Shakti Multi-Modal Cargo Terminal (GCT) policy, launched in December 2021 to develop additional terminals for rail cargo, further solidifying its role in india’s logistics and transport infrastructure. Over three decades, IRFC has been instrumental in enabling capacity enhancement for the Indian Railways, helping the organization keep pace with India’s growing transportation demands.

Industry Outlook

India’s rail network is advancing at an unprecedented pace, positioning it to become the third-largest rail network globally in the next five years, with a projected 10% share of the global rail market. Two pivotal government initiatives are set to drive private investments: private passenger trains operated by private entities across the network and a comprehensive railway station redevelopment program.

These initiatives are anticipated to attract over US$ 7.5 billion in private investment in the coming five years. Under the National Infrastructure Pipeline (NIP), Indian Railways has allocated more than ₹13.67 lakh crore for investment by 2025, accounting for 12% of the total planned infrastructure investment. The Draft National Rail Plan further envisions ₹38.22 lakh crore in capital expenditure for the rail sector by 2050. With the introduction of the semi-high-speed Vande Bharat trains, Indian Railways aims to operate 75 trains over 10-12 lakh kilometers by 2025-26.

The government’s focus on infrastructure is fueling railway development, with an ambitious plan to invest ₹50 lakh crore (US$ 715.41 billion) by 2030. This emphasis, coupled with favorable policy frameworks, is expected to encourage participation from both domestic and International private players, further boosting passenger and freight transport and supporting long-term sector growth.

Business Segments

Indian Railway Finance Corporation (IRFC) continues to focus on several key business segments that align with its role as the financial backbone of Indian Railways. These segments are as follows-

  • Rolling Stock Financing: This is IRFC’s largest business segment, primarily dedicated to funding the procurement of rolling stock assets like locomotives, passenger coaches, and wagons. By supporting Indian Railways in addressing the growing transportation demand, IRFC plays a crucial role in capacity enhancement across the network.
  • Railway Infrastructure Projects: IRFC finances essential infrastructure projects, including dedicated freight corridors, multi-modal logistics parks, and station redevelopment. These efforts align with the National Infrastructure Pipeline (NIP) to strengthen logistics and connectivity nationwide, supporting economic and industrial growth.
  • High-Speed Rail Corridors and Modernization: A critical area for IRFC is the funding of high-speed and semi-high-speed rail projects. The Vande Bharat trains and other initiatives aim to establish multiple high-speed corridors by FY26, significantly reducing travel time on key routes. IRFC ensures timely funding for these transformative projects.
  • Energy and Green Projects: With sustainability as a priority, IRFC supports green energy initiatives within Indian Railways, including solar and wind power installations along rail networks. These projects align with the Indian Railways’ goal of achieving a net-zero carbon footprint by 2030, advancing India’s commitment to environmental sustainability.
  • Joint Ventures and Special Purpose Vehicles (SPVs): IRFC collaborates through joint ventures and SPVs with state entities and private players to enhance freight and passenger capabilities. These projects leverage public-private partnership (PPP) models to create backward and forward linkages within Indian Railways, boosting efficiency and innovation.

Through these key segments, IRFC strategically supports the modernization and expansion of Indian Railways, contributing significantly to national infrastructure goals and promoting a sustainable rail network.

Key Subsidiaries and Their Information

As of FY25, Indian Railway Finance Corporation (IRFC) continues to operate without any major subsidiaries directly associated with its core business operations. However, IRFC collaborates closely with various entities, particularly in public-private partnership (PPP) arrangements and special-purpose vehicles (SPVs), aimed at enhancing rail infrastructure projects and rolling stock for Indian Railways. These partnerships align IRFC with infrastructure development initiatives, especially as the government prioritizes rail network expansion and modernization across India.

Q2 FY25 Highlights

  • Revenue from Operations has been ₹6,899 crore, marking a 2% YoY increase. Net Profit (PAT) of ₹1,612 crore, showing a 4% YoY growth from ₹1,544 crore in Q2 FY24.
  • Operating Profit of ₹1,650.6 crore, reflecting a 4.5% YoY increase from ₹1,579.53 crore. Total Expenses stood at₹5,287.55 crore, reflecting a slight 1% rise compared to ₹5,217.60 crore in Q2 FY24.
  • IRFC’s net worth increased to ₹51,464.12 crore in Q2 FY25, a significant rise from ₹46,883.22 crore in the same quarter of FY24, reflecting the company’s improved financial position. The debt-equity ratio stood at 7.83 in the September 2024 quarter, down from 8.67 in Q2 FY24, indicating a slight reduction in leverage and improved financial stability.
  • Indian Railway Finance Corporation (IRFC) has set November 12, 2024, as the record date to determine the shareholders who are eligible for the interim dividend. This means that shareholders registered as of this date will be entitled to receive the interim dividend declared by the company.
  • The IRFC Board has approved the financing of 20 Bogie Open Bottom Rapid (BOBR) rakes under the General-Purpose Wagon Investment Scheme (GPWIS) of the Ministry of Railways (MoR) to NTPC for up to ₹700 crore under a Finance Lease. IRFC has entered into Memoranda of Understanding (MoUs) with RITES and IIFCL to form strategic collaborations aimed at enhancing its operational and financing capabilities for future railway projects.

Financial Summary

SWOT Analysis

Strengths:

  1. Strategic alignment with Indian Railways
  2. Strong government backing
  3. Expanding asset portfolio
  4. Solid market presence

Weaknesses:

  1. High debt burden
  2. Limited revenue sources
  3. Sensitivity to operating margins

Opportunities:

  1. Infrastructure growth
  2. Private sector collaborations
  3. Adoption of new technology
  4. Green financing potential

Threats:

  1. Regulatory compliance demands
  2. Rising competition
  3. Economic and geopolitical risks
  4. Interest rate fluctuations