{"id":1825,"date":"2021-01-17T05:47:50","date_gmt":"2021-01-17T05:47:50","guid":{"rendered":"https:\/\/rakshithpai.com\/?p=1825"},"modified":"2021-12-27T12:12:39","modified_gmt":"2021-12-27T12:12:39","slug":"indian-railway-finance-corporation-ipo-worth-subscribing","status":"publish","type":"post","link":"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/","title":{"rendered":"Indian Railway Finance Corporation IPO. Is it worth Subscribing?"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-662cd5566fde8\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\" style='display:none' id=\"ez-toc-cssicon-toggle-item-662cd5566fde8\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Business_Introduction\" title=\"Business Introduction:\">Business Introduction:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Financial_Information\" title=\"Financial Information:\">Financial Information:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#IRFC_Financials\" title=\"IRFC Financials:\">IRFC Financials:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Contingent_liability\" title=\"Contingent liability:\">Contingent liability:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Cash_Flow_Statement\" title=\"Cash Flow Statement:\">Cash Flow Statement:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#How_IRFC_issues_and_subscribes_for_Bond\" title=\"How IRFC issues and subscribes for Bond:\">How IRFC issues and subscribes for Bond:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Dividend_earnings_expected\" title=\"Dividend earnings (expected):\">Dividend earnings (expected):<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Credit_rating\" title=\"Credit rating:&nbsp;\">Credit rating:&nbsp;<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Management_Analysis\" title=\"Management Analysis:&nbsp;\">Management Analysis:&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Use_of_IPO_proceeds\" title=\"Use of IPO proceeds:\">Use of IPO proceeds:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Risk_Factors\" title=\"Risk Factors:&nbsp;\">Risk Factors:&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Industry_Overview\" title=\"Industry Overview:&nbsp;\">Industry Overview:&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Conclusion\" title=\"Conclusion:&nbsp;\">Conclusion:&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/rakshithpai.com\/indian-railway-finance-corporation-ipo-worth-subscribing\/#Also_read\" title=\"Also read:\">Also read:<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Business_Introduction\"><\/span><b>Business Introduction:<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">Incorporated as a Public Company in 1986. IRFC is a wholly-owned company by the Government of India. <\/span><span style=\"font-weight: 400;\">The President of India acting through the Ministry of Railways (MOR) is the promoter of the company. IRFC<\/span><span style=\"font-weight: 400;\"> is going for an IPO on 18th January 2021 &#8211; 20th January 2021. IPO for 140.7 crore (1,40,70,69,000) Equity shares of face value Rs.10 each.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>IRFC is primarily engaged in financing the acquisition of rolling stock assets<\/strong> (providing solutions and associated services in regards to maintenance and utilization of railway assets and Infrastructure), <strong>leasing of railway infrastructure assets, and lending to entities under the Ministry of Railways (MOR), and such others.<\/strong><\/span><\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link has-text-color has-background\" href=\"https:\/\/zerodha.com\/open-account?c=PR4768\" style=\"border-radius:50px;background-color:#e4fa00;color:#0f0027\" rel=\"nofollow\"><strong>Open Zerodha Account Now!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><span style=\"font-weight: 400;\">Being the borrowing arm of Indian Railways, IRFC is responsible to raise funds for the Ministry of Railways that is required to procure rolling stock assets (such as wagons, trucks, electric multiple units, locomotives, coaches), its improvement, expansion, and assets management.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Over the last three decades, the company has played a significant role in supporting the capacity enhancement of the Indian Railways by financing a proportion of its annual plan outlay.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Financial_Information\"><\/span><b>Financial Information:<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"IRFC_Financials\"><\/span><strong>IRFC Financials:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/IRFC-Financials-300x180.png\" alt=\"IRFC Financials\" class=\"wp-image-1826\" width=\"1181\" height=\"709\" srcset=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/IRFC-Financials-300x180.png 300w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/IRFC-Financials-1024x615.png 1024w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/IRFC-Financials-768x461.png 768w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/IRFC-Financials.png 1400w\" sizes=\"(max-width: 1181px) 100vw, 1181px\" \/><\/figure><\/div>\n\n\n\n<p class=\"has-text-align-center\"><strong>Source: IRFC RHP issued for IPO (Page 23)<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Contingent_liability\"><\/span><b>Contingent liability:<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Contingent-Liability-300x73.png\" alt=\"Contingent Liability\" class=\"wp-image-1828\" width=\"1183\" height=\"288\" srcset=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Contingent-Liability-300x73.png 300w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Contingent-Liability-1024x250.png 1024w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Contingent-Liability-768x188.png 768w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Contingent-Liability.png 1374w\" sizes=\"(max-width: 1183px) 100vw, 1183px\" \/><\/figure><\/div>\n\n\n\n<p class=\"has-text-align-center\"><strong>Source: IRFC RHP issued for IPO (Page 24)<\/strong><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>Tax liability of Rs.2,653.76 crore along with Interest &amp; Penalty is seen<\/strong>. The same is not demanded by the concerned authority for varied reasons. And, the Company is not liable to pay the tax. However, if any liability arises that would be recoverable from the Ministry of Railways, India.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">The disputed demand of tax including interest thereon amounted to <strong>Rs.94.8 lakh<\/strong>.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cash_Flow_Statement\"><\/span><b>Cash Flow Statement:<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Cash-Flow-300x59.png\" alt=\"Cash Flow\" class=\"wp-image-1829\" width=\"1178\" height=\"232\" srcset=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Cash-Flow-300x59.png 300w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Cash-Flow-1024x201.png 1024w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Cash-Flow-768x150.png 768w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Cash-Flow.png 1302w\" sizes=\"(max-width: 1178px) 100vw, 1178px\" \/><\/figure><\/div>\n\n\n\n<p class=\"has-text-align-center\"><strong>Source: IRFC RHP issued for IPO (Page 39)<\/strong><\/p>\n\n\n\n<p><strong>Negative cash flows over extended periods, or significant negative cash flows in the short term, could materially affect the companies (IRFC\u2019s) ability to operate its business and implement its growth plans.<\/strong><\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link has-text-color has-background\" href=\"https:\/\/zerodha.com\/open-account?c=PR4768\" style=\"border-radius:50px;background-color:#e4fa00;color:#0f0027\" rel=\"nofollow\"><strong>Open Zerodha Account Now!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_IRFC_issues_and_subscribes_for_Bond\"><\/span><strong>How IRFC issues and subscribes for Bond:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/How-IRFC-bonds-work-298x300.png\" alt=\"\" class=\"wp-image-1833\" width=\"1180\" height=\"1188\" srcset=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/How-IRFC-bonds-work-298x300.png 298w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/How-IRFC-bonds-work-150x150.png 150w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/How-IRFC-bonds-work-768x774.png 768w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/How-IRFC-bonds-work.png 781w\" sizes=\"(max-width: 1180px) 100vw, 1180px\" \/><\/figure><\/div>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Bond-IRFC-300x286.png\" alt=\"\" class=\"wp-image-1834\" width=\"1185\" height=\"1130\" srcset=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Bond-IRFC-300x286.png 300w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Bond-IRFC-768x733.png 768w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/Bond-IRFC.png 788w\" sizes=\"(max-width: 1185px) 100vw, 1185px\" \/><\/figure><\/div>\n\n\n\n<p class=\"has-text-align-center\"><b><strong>Source: IRFC RHP issued for IPO (Page <\/strong>110 &amp; Page 113)<\/b><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Dividend_earnings_expected\"><\/span><b>Dividend earnings (expected):<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">As per the CPSE Capital Restructuring Guidelines, all central public sector enterprises are required to pay<strong> a minimum annual <a href=\"https:\/\/rakshithpai.com\/best-dividend-paying-stocks-in-india\/\">dividend<\/a> of 30.00% of profit after tax or 5.00% of the net worth, whichever is higher<\/strong>. Since the company (IRFC) is or will be generating sufficient profit (expected). Investors can expect a good dividend over their investment.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Credit_rating\"><\/span><b>Credit rating:&nbsp;<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">IRFC has been awarded a rather comfortable <a href=\"https:\/\/rakshithpai.com\/credit-rating-importance\/\">credit rating<\/a> score as follows.<\/span><\/p>\n\n\n\n<ol><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">CRISIL = \u201cAAA\u201d<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">ICRA = \u201cAAA\u201d<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">CARE = \u201cAAA\u201d<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Moody\u2019s = \u201cBaa2\u201d (negative)<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Fitch = \u201cBBB -\u201d (stable)<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Standard &amp; Poor\u2019s = \u201cBBB -\u201d (stable)<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Japan Credit Rating Agency = \u201cBBB +\u201d (stable)<\/span><\/li><\/ol>\n\n\n\n<p><b>Note:<\/b><span style=\"font-weight: 400;\"> Any downgrade in the given credit ratings or India\u2019s debt rating could increase IRFC\u2019s finance costs and adversely affect their ability to borrow funds and the business, results of operations, financial condition, and cash flows.<\/span><\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link has-text-color has-background\" href=\"https:\/\/zerodha.com\/open-account?c=PR4768\" style=\"border-radius:50px;background-color:#e4fa00;color:#0f0027\" rel=\"nofollow\"><strong>Open Zerodha Account Now!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Management_Analysis\"><\/span><b>Management Analysis:&nbsp;<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">IRFC believes that the industry knowledge and experience of its senior management has enabled them to develop and implement a consistent business plan and streamlined operational procedures, and allowed them to maintain consistent business growth over the years.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">The management of IRFC\u2019s knows about the concentrated business portfolio. And, has made efforts in diversifying the same. The management has diversified its borrowing portfolio through a range of financing instruments and identifying new markets and investors, including through the issuance of \u2018green bonds\u2019 and \u2018medium-term notes\u2019.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>Management governance and Business Ethics are not affected<\/strong>. And, the same can be validated via the companies financial performance and credit scores.<\/span><\/p>\n\n\n\n<p><strong>A touch of IT and the advancement of technology is always appreciated. Something the management has to concentrate more hereon.<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Use_of_IPO_proceeds\"><\/span><b>Use of IPO proceeds:<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><b>IPO proceeds shall be utilized for the following reasons;<\/b><\/p>\n\n\n\n<ol><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To <strong>augment the company&#8217;s equity capital base<\/strong> to meet business future growth requirements.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To meet general corporate purposes which shall not exceed 25% of the gross proceeds of the Fresh Issue. I.e, <strong>16.5% of the entire IPO value<\/strong>.&nbsp;<\/span><\/li><\/ol>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/IPO-300x172.png\" alt=\"IRFC IPO details\" class=\"wp-image-1842\" width=\"1184\" height=\"679\" srcset=\"https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/IPO-300x172.png 300w, https:\/\/rakshithpai.com\/wp-content\/uploads\/2021\/01\/IPO.png 683w\" sizes=\"(max-width: 1184px) 100vw, 1184px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Risk_Factors\"><\/span><b>Risk Factors:<\/b><span style=\"font-weight: 400;\">&nbsp;<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">IRFC\u2019s major objective is to borrow funds from the markets to finance the creation and\/or acquisition of assets that be leased to the Indian Railways. While the <strong>IRFC can raise funds from the domestic and international markets, it cannot advance it directly to the Indian Railways<\/strong>.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">The company has to <strong>acquire assets and lease them to the Railways<\/strong>. IRFC also gets the benefit of depreciation of the assets. This is a risk-free business model since all the lease receivables from the Ministry of Railways are factored in the Union Budget. The lease rentals are also earmarked in the Budget ensuring steady revenue to IRFC.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Thus, <strong>the company had \u201czero\u201d NPA since its incorporation in 1986<\/strong> and <strong>all its advances are 100% risk-free<\/strong> for the same is given to Indian Railways. This is the reason, the company has shown consistent profit year after year.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">But, being too much <strong>dependent on one entity (IRCTC) puts the company IRFC in a precarious situation<\/strong>.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link has-text-color has-background\" href=\"https:\/\/zerodha.com\/open-account?c=PR4768\" style=\"border-radius:50px;background-color:#e4fa00;color:#0f0027\" rel=\"nofollow\"><strong>Open Zerodha Account Now!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><span style=\"font-weight: 400;\">Since major or, almost all of IRFC\u2019s revenue is factored in due to its business with IRCTC. Any shortcomings with the Railway business and the companies (IRFC) financials will take a hit.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Although the growth for the Railways is just yet to start, India as a country is growing at a rapid rate. This gives a high demand for a proper transportation network. Something Indian Railways can fill in easily. With demand comes competition. In this case, competition from private players.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">In 2020, to cut short the railways business loss and make it into a profitable entity. The Indian government has rolled out an initiative with which <strong>private players get to invest around Rs.30,000 crore into the railway system through rolling stock and other expenditures<\/strong>.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>The government has identified 109 busy routes across India to run 151 private trains for 35 years<\/strong>. Although this amounts to just 5% of total trains in India. This is just the beginning and what comes next is more privatization.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Now, the question is, will the privatized trains take IRFC\u2019s assistance in maintaining the assets? What if that part of the business is also privatized or managed by a different entity? Because, Lease income, interest on loans, and pre-commencement lease interest income together <strong>represented 99.81% and 99.64% of IRFC\u2019s 2019 total revenue from the operation<\/strong>.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">IRFC is completely dependent on the Indian Railway sector (mainly IRCTC) growth. which makes it susceptible to the GoI initiatives to modernize the railways and other policies and any slowdown in the growth of Indian Railways will impact IRFC\u2019s business and results of operations.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">More importantly, will the <strong>&#8220;Public-Private Partnership&#8221;<\/strong>&nbsp;work in the case of Indian Railways? And, if it does. Will the same be beneficial to IRFC? Only time can answer these questions.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">And, as stated in IRFC\u2019s RHP (prospectus) &#8211; <\/span><b><i>\u201cWe derive a significant amount of our revenue from operations from the Indian Railways and a loss of or reduction in business from the Indian Railways, any direct borrowing by the Indian Railways or introduction of any new avenues of funding by the Ministry of Railways, Government of India (the \u201cMoR\u201d) could have an adverse effect on our business\u201d.<\/i><\/b><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Industry_Overview\"><\/span><b>Industry Overview:&nbsp;<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">IRCTC is India\u2019s largest railway network in the world and the only Railway company in India. So, the company has got a clear monopoly aka <strong>\u201cnatural monopoly\u201d<\/strong>. It employs over 12 lakh Indians. And, since IRFC solely works for IRCTC. As long as IRCTC maintains its monopoly and market position. The company&#8217;s (IRFC) financial position will not be affected.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">IRFC has a unique business model and relies heavily on Indian Railways for profits. As long as the agreement between IRFC and the Ministry of Railways (MoR) keeps renewing, the company runs a risk-free business despite <strong>having high long-term debt amounting to Rs.1,84,631.65 crores<\/strong>.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Since covid, All the economists and institutions around the world have seen India\u2019s capabilities for future growth. This comes with further infrastructural investments. <strong>Infrastructure such as transportation facilities in regards to connecting every corner of the nation is of utmost importance<\/strong>.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Thus, the demand for Railways is ever existing. This expansion in infrastructure will demand more assistance from the Indian Railway Finance Corporation (IRFC). However, if the Government of India (GoI) or Ministry of Railways (MoR) changes its policies regarding IRFC, then its profitability can get affected.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><b>Conclusion:&nbsp;<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">Finally, If the GOI is in fact serious about disinvesting the Railway business, and Indian Railway is the major if not only business operation handled by IRFC. Due to disinvestment, the comfortable cash and investment position of the business will be affected.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">This could further affect the credit ratings and thus, can make the borrowings costly. There&#8217;s also some Railway union&#8217;s disagreement about privatization. But, without privatization. Can the industry completely rely on the government and such institutions for funding and can they come up with an operational competitive advantage?&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Although, the Government of Indian owns a significant stake in the company. Over the years, the same is said to be disinvested. This holdings sale will come with lesser support from GOI &amp; MOR.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\"><strong>To be self-sufficient should be the main goal of the company. If in near future, IRFC can achieve this by its own operational source whilst diversifying its portfolio with other business (anything other than Indian Railways). Only then, the company can be Investment worthy<\/strong>.<\/span><\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button is-style-outline\"><a class=\"wp-block-button__link has-text-color has-background\" href=\"https:\/\/zerodha.com\/open-account?c=PR4768\" style=\"border-radius:50px;background-color:#e4fa00;color:#0f0027\" rel=\"nofollow\"><strong>Open Zerodha Account Now!<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><b>Disclaimer<\/b>: All the information on this website is published in good faith and for general information purpose only.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Also_read\"><\/span><strong>Also read:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul><li><strong><a href=\"https:\/\/rakshithpai.com\/best-investment-plans-india-middle-class\/\">Best Investment Plans in India for Middle Class<\/a><\/strong><\/li><li><strong><a href=\"https:\/\/rakshithpai.com\/how-to-invest-in-stock-market-a-beginners-guide-to-investing\/\">How to Start Investing? A Beginners Guide to Investing<\/a><\/strong><\/li><li><strong><a href=\"https:\/\/rakshithpai.com\/how-to-construct-a-profitable-investment-portfolio\/\">How To Construct a Profitable Investment Portfolio?<\/a><\/strong><\/li><li><strong><a href=\"https:\/\/rakshithpai.com\/investing-in-your-20s\/\">Investing tips in your 20s<\/a><\/strong><\/li><li><strong><a href=\"https:\/\/rakshithpai.com\/investing-in-your-30s\/\">Investing tips in your 30s<\/a><\/strong><\/li><li><strong><a href=\"https:\/\/rakshithpai.com\/portfolio-allocation-asset-correlation-importance\/\">Portfolio Allocation, Asset Correlation &amp; its importance!<\/a><\/strong><\/li><li><strong><a href=\"https:\/\/rakshithpai.com\/best-warren-buffett-quotes\/\">Best Warren Buffett Quotes<\/a><\/strong><\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Business Introduction: Incorporated as a Public Company in 1986. IRFC is a wholly-owned company by the Government of India. The President of India acting through the Ministry of Railways (MOR) is the promoter of the company. IRFC is going for an IPO on 18th January 2021 &#8211; 20th January 2021. IPO for 140.7 crore (1,40,70,69,000) [&hellip;]<\/p>\n<div class='heateor_sss_sharing_container heateor_sss_vertical_sharing heateor_sss_bottom_sharing' style='width:44px;right: -10px;top: 100px;background-color: Dark Blue' data-heateor-sss-href='https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/posts\/1825'><div class=\"heateor_sss_sharing_ul\"><a aria-label=\"Facebook\" class=\"heateor_sss_facebook\" href=\"https:\/\/www.facebook.com\/sharer\/sharer.php?u=https%3A%2F%2Frakshithpai.com%2Fwp-json%2Fwp%2Fv2%2Fposts%2F1825\" title=\"Facebook\" rel=\"nofollow noopener\" target=\"_blank\" style=\"font-size:32px!important;box-shadow:none;display:inline-block;vertical-align:middle\"><span class=\"heateor_sss_svg\" style=\"background-color:#0765FE;width:40px;height:40px;margin:0;display:inline-block;opacity:1;float:left;font-size:32px;box-shadow:none;display:inline-block;font-size:16px;padding:0 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IPO. 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IRFC is a wholly-owned company by the Government of India. The President of India acting through the Ministry of Railways (MOR) is the promoter of the company. IRFC is going for an IPO on 18th January 2021 &#8211; 20th January 2021. IPO for 140.7 crore (1,40,70,69,000)&hellip;","_links":{"self":[{"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/posts\/1825"}],"collection":[{"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/comments?post=1825"}],"version-history":[{"count":16,"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/posts\/1825\/revisions"}],"predecessor-version":[{"id":3370,"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/posts\/1825\/revisions\/3370"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/media\/1831"}],"wp:attachment":[{"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/media?parent=1825"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/categories?post=1825"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rakshithpai.com\/wp-json\/wp\/v2\/tags?post=1825"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}