IPO : Indian Railway Finance Corporation

Indian Railway Finance Corporation (IRFC) is a 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 (NBFC- IFC) with Reserve Bank of India (RBI). Established in 1986, IRFC is a dedicated financing arm of the Indian Railways for mobilizing funds from domestic as well as overseas markets.

IRFC’s principal business is to borrow funds from the financial markets to finance the acquisition/creation of assets of the Indian Railways. The Company has adopted a cost plus lease arrangement with the Ministry of Railways (MoR) which ensures a net interest margin for IRFC. The MoR pays lease rentals to the Company on half yearly basis and the lease pricing comprises both principal repayment and interest payment. IRFC has also been lending to various entities in Railway sector like Rail Vikas Nigam Limited (RVNL), Railtel, Konkan Railway Corporation Limited (KRCL), Pipavav Railway Corporation Limited (PRCL) etc.

The Non-Banking Financial Company (NBFC) would utilize the proceeds of the IPO for augmenting equity capital base to meet future capital requirements and general corporate purposes. Attractive valuation, healthy return-ratios, expectations to post strong growth, relatively low risk business model, strategic role in financing growth of Indian Railways, and long term prospects considering electrification and network expansion makes a good bet for conservative long-term investors.

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