This PSU stock has zoomed 240% in 6 months; market cap nears Rs 1.5 trn

Shares of Indian Railway Finance Corporation (IRFC) hit a new high of Rs 112.90, as they rallied 6 per cent on the BSE in Friday's intra-day trade amid heavy volumes.

As many as a combined 92.89 million equity shares of IRFC changed in the first hour of trades on the NSE and BSE. In the past 10 trading days, on an average a combined near about 100 million shares were traded on the counter.

In the past one month, the market price of IRFC has rallied 36 per cent. In the past six months the stock of the state-owned financial institution company has zoomed 242 per cent. A sharp rally in stock price of the company has seen the market capitalisation (market cap) of IRFC inch towards Rs 1.5 trillion. Currently, IRFC's market cap stands at Rs 1.45 trillion at 10:15 AM; the BSE data shows. The company now stands at 45th position in overall market cap ranking.

IRFC was set up as the dedicated funding arm of the Indian Railways (IR) for mobilizing funds from domestic as well as overseas Capital Markets. IRFC is a Miniratna I and Schedule 'A' Public Sector Enterprise under the administrative control of the Ministry of Railways, Govt. of India. It is also registered as Systemically Important Non–Deposit taking Non-Banking Financial Company (NBFC – ND-SI) and Infrastructure Finance Company (NBFCIFC) with the Reserve Bank of India (RBI).

IRFC has played a significant role in supporting the expansion of the Indian Railways and related entities by financing a significant proportion of its annual plan outlay.

Its aim is to be one of the leading Financial Service Companies in the country, for raising funds from the capital market at competitive cost for Railway infrastructure augmentation, duly ensuring that the Corporation makes optimum profits from its operations.

Indian Railways are now poised to take transformational leap in the Amrit Kaal of the post-Independence period and fulfill the vision of 'Viksit Bharat' which includes Modern, faster, available on demand passenger services and facilities, a substantial share in freight cargo with ancillary services in logistics parks and domestic industry driven rail infrastructure of highest standards.

A record capex target of Rs 2.60 trillion in 2023-24, a 65.6 per cent higher when compared to 2022-23, is targeted to initiate the necessary changes for this vision, across the entire network. Achieving India's commitment of net zero carbon by 2070 will rest in part on more rail-bound passenger and cargo movement, IRFC said in FY23 annual report.

Favourable lease agreements between IRFC and IR protect the former's net interest margin, as interest and foreign exchange risks on its borrowings are transferred to IR. IRFC also plans to diversify its business profile by lending outside IR; however, this will form a small part of the total portfolio and advances will be to entities having linkages with IR. IRFC is also exploring lending towards non railway infrastructure assets. However, this is still in evaluation stages, and they will only enter into such arrangements in a consortium with other lenders, according to CRISIL Ratings.

The rating agency believes IRFC will continue to derive business and financial support from the GoI because of its strategic role in channeling finance to IR. Support from GoI should help IRFC maintain a strong credit risk profile.