IRFC

Powerhouse behind Indian Railways

Indian Railway Finance Corporation (IRFC), a schedule A public sector enterprise under the ad ministrative control of the Ministry of Railways, Govern ment of India, is also registered as a systematically impor tant non-deposit taking and non-banking financial com pany with the Reserve Bank of India.

The primary objective of IRFC is to meet the predominant portion of extra-budgetary resources’ re quirement of the Indian Railways through market borrowings at the most competitive terms and rates. The company’s principal business, therefore, is to borrow funds from the financial markets in order to fi nance the acquisition/creation of as sets which are then leased out to the Indian Railways.

IRFC’s cumulative financing for the rail sector has crossed Rs 5.5 lakh crore by now. These funds have been utilised for acquiring rolling stock and also building up infrastructure, constituting a significant part of the annual capital expenditure of Indian Railways. So far, it has funded the acquisition of 13,800 locomotives, 7,685 pas senger coaches, and 2,65,860 wagons -- which constitute around 80 per cent of the total rolling stock of the railways. From 2011-12 onwards, IRFC has forayed into funding of railway projects and capacity enhancement works too. IRFC has also been funding various entities in the rail sector like Rail Vikas Nigam Ltd. (RVNL), Railtel, Konkan Railway Corporation Ltd, and Pipavav Corporation Ltd.

REVENUE BOOM

The company has made rapid strides on the financial front. During the last 12 years, its revenues have expanded almost nine times from Rs 2,494 crore in fiscal 2013 to Rs 21,733 crore in fiscal 2024, with operating profit shooting up more than 104 times from Rs 92 crore to Rs 1,346 crore and net profit inching up from Rs 162 crore to Rs 1,463 crore. What is more, prospects for the company going ahead are all the more promising as the government is keen to spend substantially for modernisation and expansion of the railway network in the country. Of course, in line with the predominant bearish trend in the stock market, the stock price of IRFC has tumbled from Rs 230 to Rs 137 during the last one year, but the scope for a further de cline is very limited and the price, after a further modest decline, is ex pected to move up again. Consider:

• As the Modi government's inclination towards development of the railways and its announcements of mega rail projects and allotment of huge amounts of money last year are well- known, trade, industry and market circles expect that the gov ernment will continue to pay greater attention to develop ment of railway infrastructure in the new budget to be pre sented on February 1, 2025. Little wonder, almost all rail way stocks have turned out to be multibaggers during the last one year or so.
• Of course, during the recent sharp market correc tion accentuated by the selling avalanche by foreign inves tors, discerning investors have seen a great opportunity to accumulate these shares in a big way. IRFC plays a very significant role in development of railway infrastructure, and its prospects going ahead are highly promising.

STOCK RALLY

• According to Dhwani Shah Patel, a technical ex pert, IRFC shares have a strong support zone of Rs 128 to Rs 130. "These shares have taken support in this range. I recommend maintaining a 'stop loss' at Rs 130 and my ad vice to IRFC investors is to 'average up' above Rs 160. Once IRFC shares cross Rs 160, the stock will extend the rally with heavy buying momentum. The IRFC share price target is Rs 200. CMP is Rs 137." The railways need a lot of investment for development of infrastructure and the prospects for IRFC are immense. Discern ing investors can take the advantage of the current falling price trend and build up a good portfolio.

PERFORMANCE INDICATORS (Rs. in crore)

IDBI BANK

Set for new innings as private bank

IDBI Bank is one of the largest scheduled commercial banks in the country, jointly owned by LIC (49.24 per cent stake) and the Government of India (45.48 per cent stake). It was established as Industrial Development Bank of India by the government in 1964 as a wholly owned subsidiary of the RBI — a development finance institution whose aim was to provide financial services to the industrial sector. In 2005, it was merged with its subsidiary commercial division, IDBI Bank, and was categorised as ‘other public sector bank. In 2019, when it was in financial trouble, the govern ment asked LIC to infuse capital in the bank and to manage the bank. Consequent upon LIC acquiring a majority 51 per cent of the paid-up capital, the bank was categorised as a private sector bank.

IDBI is the mother of several na tional institutions, like SIDBI, EXIM, National Stock Exchange of India, SEBI, and National Security Depository Ltd, which have roots in IDBI.

The bank was in financial difficulties with high NPAs and serious capital adequacy issues, but has turned the corner. During the last 12 years, it has emerged as one of the largest commercial banks in the country, with revenues remaining steady at around Rs 26,446 crore in 2024, as against Rs 25,076 crore in fiscal 2013. Profits have shot up from Rs 1,902 crore in fiscal 2013 to Rs 5,814 crore for fiscal 2024, in striking contrast to a loss of Rs 531 crore in fiscal 2013, fol lowed by a spurt from Rs 1,902 crore in fiscal 2013 to Rs 5,814 crore in fiscal 2024. During the last five years, the bank has seen CAGR profit growth of 19 per cent, and 56 per cent during the last 3 years. What is more, its prospects going ahead are very promising. Consider:

PROFIT SPURT

• The bank is doing extremely well in the current year. During Q3FY25, it has recorded a 31% spurt in profit from Rs 1,458 crore in the corresponding quarter of the previous year. Net interest income or core income advanced by 23% to Rs 4,228.7 crore. The asset quality was stable on a qoq basis. Gross NPAs for Q3FY25 stood at 3.57 per cent as against 3.68 per cent for the same quarter a year ago, while net NPAs stood at 0.18 per cent from 0.2 per cent qoq.
• The government, which holds — directly as well as indirectly — around 95 per cent eq uity in the bank, has decided to dis invest a 60 per cent stake to bidders like Fairfax Financial, Emirates NBD, Oaktree Capital, and Kotak Mahindra Bank, who submitted expressions of interest in January 2024. These bid ders have access to cloud-hosted data room such as the bank’s top 20 bor rowers, exposure, provisioning and details of NPAs. They are expected to submit their final bids by the end of February 2025, with the entire transaction poised to be com pleted by the first half of fiscal 2026. This disinvestment is expected to take the bank to the next level of growth.
• Meanwhile, to expand its activities, the bank is busy raising finance. Over a month ago, the board of directors of the bank approved raising Rs 10,000 crore through long term bonds in order to fund infrastructure and affordable housing projects. Half of the amount (Rs 5,000 crore) will be raised by March 31, 2025 and the remaining amount (Rs 5,000 crore) will be raised in 2026.

MORE FUNDS

• The board has also approved the proposal for sale of IDBI Bank’s entire holding of 8.54 lakh shares, having a face value of Rs 100 a piece, which constitutes a 21.14 per cent shareholding in Pondicherry Industrial Promotion De velopment and Investment Corporation.
• These additional funds will give a big push to the bank’s topline as well as bottomline during and after 2026. Shares of the company are quoted around Rs 81. After disinvestment, the price can go up to Rs 150 and beyond. Discerning investors will do well to in clude these stocks in their portfolio for long-term gains.

PERFORMANCE INDICATORS (Rs. in crore)