This railway multibagger stock has caught everyone’s attention in the market. IRFC share price has reached an all-time high of ₹229 on 15th July 2024, rising more than 800% since its IPO in January 2021. And, investors continue to bet heavily on this stock.
IRFC stands for Indian Railway Finance Corporation, and its primary task is to meet Indian Railways’ financial requirements by borrowing funds from financial markets. In short, IRFC is a funding arm of Indian Railways.
In this article, we will analyze the IRFC share price and delve deeper into its financials. Let’s start.
What does IRFC do?
IRFC is a public sector enterprise under the administrative control of the Ministry of Railways. It was incorporated on 12th December 1986 as a dedicated financing arm of Indian Railways to mobilize funds from domestic and overseas markets.
Its primary business is to finance the acquisition of rolling stock assets of Indian Railways including locomotives, passenger coaches, wagons, electric multiple units and leasing these assets to other entities under the Ministry of Railways.
All of these assets are leased for up to 30 years and lease rentals serve as the primary source of revenue for the company. The lease is divided into blocks of two 15-year periods. In the first 15 years, the lessee pays the principal amount for the leased assets, followed by a rent of ₹1 lakh per annum for the remaining 15 years, or until the asset is sold off before the lease period ends.
So far, IRFC has funded the acquisition of 13,764 locomotives, 76,735 passenger coaches, and 2,65,815 wagons, accounting for approximately 75% of the total rolling stock fleet of Indian Railways.
It is also lending to other railway entities like RVNL, Railtel, Konkan Railway Corporation Limited, and Pipavav Railway Corporation Limited, etc.
IRFC raises funds through issue of both taxable and tax-free bonds and term loans from banks and financial institutions.
IRFC Management Team
Smt. Usha Venugopal is the Chairman and Managing Director of IRFC from 1st August 2024. She is an Indian Railways Account Service (IRAS) officer of 1987 batch and has over 35 years of experience handling various key roles in the Ministry of Railways.
Ms. Uma Ranade is the CEO and Railway Board has given her additional charge of CMD. She is a 1986 batch IRAS officer with over 35 years of experience in various Railway divisions and the Ministry of Railways.
Ms. Shelly Verma is the Director (Finance) of IRFC. She holds B.Com degree from Shri Ram College of Commerce, Delhi and is a fellow member of ICAI. Prior to joining IRFC, she was with Power Finance Corporation as Executive Director (Finance) and has more than 30 years of experience in power sector financing.
Shareholding Pattern
The shareholding pattern shows that mutual funds and other institutional investors own a small stake in the company.
The company’s free-float is close to 14%, which means that only 14% of its shares are available for trading. When compared to IRCTC, the free float is nearly 38%.
When demand for shares rises, a lower free float frequently causes a sharp increase in share price.
IRFC Financials
Total Income
In FY24, the company’s total income increased by 12.2% to ₹26,656 crores from ₹23,763 crores.
And, in the first half of FY25, IRFC’s total income increased marginally by 1.7% to ₹13,666.22 crores from ₹13,437.93 crores.
Net Profit
In FY24, net profit of the company increased by 4% to ₹6,412 crores from ₹6,167 crores.
And, in H1FY25, IRFC’s net profit increased by 3% to ₹3,189.47 crores from ₹3,095.86 crores.
Asset Under Management
Asset Under Management or AUM reflects the total market value of all assets that the company manages for its clients. In IRFC’s case, Indian Railways is the primary client.
At the end of FY24, IRFC managed assets worth ₹4.64 lakh crores and at the end of H1FY25, AUM marginally declined to ₹4.62 lakh crores.
Asset Quality
IRFC is one of the few NBFCs in India with no NPAs. This is because all loans are guaranteed by the Indian government, allowing it to operate with a low-risk business model and borrow funds at low rates.
Also, the Government of India has exempted IRFC from paying any income taxes.
IRFC Share Price Analysis
IRFC shares were listed on 29th January 2021 and made a quiet start around its IPO issue price. Eventually, IRFC share price exploded to make an all-time high of ₹229 on 15th July 2024, around 9 times its listing price.
As of 15th November 2024, IRFC market cap stands at ₹1,82,515 crore and is trading at ₹140 per share.
IRFC has a good dividend payment history. In 2021, the dividend per share was ₹1.43, ₹1.5 in 2023, and ₹1.5 in 2024.
As of 15th November 2024, the dividend yield of IRFC stands at 1.07.
Earning Per Share (EPS)
EPS is an essential metric to assess whether a company is enhancing its profitability per share over time. Consistent flat EPS growth suggests that the company isn’t generating sufficient profit for its shareholders.
The following is the last five years EPS of IRFC.
| FY20 | ₹3.93 |
| FY21 | ₹3.66 |
| FY22 | ₹4.66 |
| FY23 | ₹4.85 |
| FY24 | ₹4.91 |
Over the last five years, IRFC reported a marginal increase in EPS. Consistent growth in earnings is important for rise in share price.
Return on Equity (ROE)
Return on Equity is calculated by dividing the net profit by shareholder’s fund or equity.
The following is the last 5 years ROE of IRFC:
| FY20 | 11.92 |
| FY21 | 12.29 |
| FY22 | 14.85 |
| FY23 | 13.93 |
| FY24 | 13.03 |
The five year average ROE of IRFC is 13.20%.
A consistent ROE of 15% or higher is generally considered good as it indicates that the company is effectively using shareholder’s equity to generate profits.
Return on Assets (ROA)
Return on assets is another profitability metric that is especially important for banks and NBFCs, which have an asset-heavy balance sheet. It is calculated by dividing net profit by total assets.
The following is the last five year ROA of IRFC.
| FY20 | 1.33 |
| FY21 | 1.16 |
| FY22 | 1.35 |
| FY23 | 1.29 |
| FY24 | 1.32 |
The five year average ROA of IRFC is 1.29.
A ratio of more than one indicates that a company is generating more profit than the value of its assets.
Price-to-Book VS Median Price-to-Book
For banking and NBFC stocks, the price-to-book ratio is the more appropriate ratio to measure valuations.
IRFC is trading at a price-to-book value of 3.5 times, while the 5 year Median Price-to-book value is 0.9 times, which means, it is trading at higher valuation compared to historical averages.
Future Growth Potential of IRFC
The growth of IRFC is dependent on the growth of Indian Railways and its ability to raise low-cost funds.
In FY25, the Government of India has allocated a record ₹2.62 lakh crore in capex, a significant increase from ₹28,174 crores in FY14. The money will be spent on modernization of Indian Railways, new infrastructure development, and improving passenger safety and experience.
Recent developments, such as the introduction of Vande Bharat train sets and Vande Bharat Sleeper train sets, the conversion of train rakes from ICF to LHB coaches, the transition to a fully electrified network, and the Dedicated Freight Corridor, have all contributed to an increase in demand for rolling stock within the Indian Railways.
The India’s railway and metro rolling stock market is expected to reach ₹4.75 lakh crores in the next five years, growing at a CAGR of 46%, showcasing huge growth potential for IRFC.
One of the biggest advantages of IRFC is its low risk business model and predictable business growth. Recently, it has diversified its lending activities to financially viable project financing, And, it is the sole player in its business, giving it a long runway of growth.
However, in the event of unfavorable policy changes by the Ministry of Railways, it can adversely impact the growth of the company and IRFC share price.
FAQ on IRFC Share Price
When was IRFC incorporated?
IRFC was incorporated on 12th December 1986 to raise money from the debt capital market to meet the extra budgetary requirements of Indian Railways in financing rolling stocks.
How has IRFC share price performed in the last three years?
IRFC share price hit an all time high of ₹229 on 15th July 2024. Its shares were listed on 29th January 2021 at around ₹25, recording a CAGR of 79% over the last three years.
Is IRFC a profitable company?
Yes, IRFC is a profitable company and has recorded a profit growth of 4% to ₹6,412 crores in FY24.
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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.
