I R F C — Q3 FY26 earnings call

Call held 20 Jan 2026

Management summary

IRFC delivered a strong Q3 FY26, surpassing asset sanction guidance and achieving significant disbursements. The company reported robust AUM growth to INR 4.75 lakh crore and improved NIM to 1.51% YoY, driven by better margins on diversified assets. Successful fundraising through ECB and zero-coupon bonds highlighted its strong market position. Management expressed confidence in continued quarterly growth for PAT, NIM, and AUM, projecting AUM to exceed INR 5 lakh crore.

Highlights

  • Sanction of assets surpassed annual guidance, indicating strong business momentum.

  • Disbursements reached approximately INR 22,500 crores (three-fourths of INR 30,000 crores target) for the nine months ended December 2025.

  • Margins on new assets are significantly better, at 2x to 3x compared to Indian Railways, despite competitive markets.

  • Successfully raised an attractive ECB loan in Yen currency after a three-year break, and tested zero coupon bonds in 2025.

  • AUM grew by 3.26% QoQ from INR 4.6 lakh crore to INR 4.75 lakh crore in Q3 FY26, with a target to reach INR 5 lakh crore plus.

  • Net Interest Margin (NIM) for Q3 FY26 improved to 1.51% from 1.4% in Q3 FY25, with an expectation to clock more than 1.5% for the full FY26.

Key financials

4 periods

Headline

  • AUM
    ₹4.75L Cr
    QoQ +3.3%
  • Cost of Funds
    7%
  • Standard Asset Provisioning
    ₹50 Cr

Q3 FY25

  • NIM
    1.4%

Q3 FY26

  • NIM
    1.5%
    YoY +7.9%

9M FY26

  • Disbursements
    ₹22,500 Cr

What they filed

Q1 FY27: revenue up 19.5%, net profit up 10.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue6,900 6,763 6,723 6,915 6,372 −8%6,661 −2%7,336 +9%8,261 +19%
EBITDA6,862 6,724 6,679 6,869 6,323 −8%— — —
Net profit1,613 1,631 1,682 1,746 1,777 +10%1,802 +10%1,684 +0%1,927 +10%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Debt Debt disclosed Cost 7%
    • New borrowing Raised ECB loan in Yen currency at a very attractive rate, described as perhaps the best in the market.
    • New borrowing Successfully tested zero coupon bonds at 6.80% for 10-year bullet payment.
    • New borrowing Raised 5-year bond at 6.5% approximately 6 months ago.
    • Rate reset ECB loans with 5-year hedging cost come to around 6.2% to 6.3%.
    Cost of fund is apprx 7%.
  • Liquidity Liquidity disclosed Capital Adequacy Ratio (CRAR) is nearly 160% against a required norm of 25%, providing significant legroom for growth.
    But our capital adequacy or CRAR today also is nearly 160% against the norm of required number of nearly 25%. So, we have a lot of legroom still to go for these kind of assets

Guidance & targets

Profitability

  • PAT Growth Profitability · every quarter · High confidence grow every quarter
    Overall, the company is well positioned now with very healthy pipeline going forward, living to the expectations and the guidance that we have given that our PAT should grow every quarter.

    — Manoj Kumar Dubey

Margin

  • NIM Growth Margin · every quarter · High confidence grow every quarter
    Our NIM should also grow every quarter.

    — Manoj Kumar Dubey

  • NIM (FY26) Margin · this year (FY26) · High confidence more than 1.5%
    But going forward, last year in total FY, we clocked around 1.4, but this year we will be clocking more than 1.5.

    — Manoj Kumar Dubey

AUM

  • AUM Growth AUM · every quarter · High confidence grow every quarter
    Our asset under management should also grow every quarter.

    — Manoj Kumar Dubey

  • AUM Target AUM · going ahead · Medium confidence INR 5 lakh crore plus
    I can only tell you that it is going to grow, and it should be somewhere INR 5 lakh plus going ahead.

    — Manoj Kumar Dubey

  • AUM Addition from New Entities AUM · next 5 years · High confidence INR 3 lakh crore
    INR 3 lakh crore we want to add in next 5-year time.

    — Manoj Kumar Dubey

Cost of Borrowing

  • Overall Cost of Borrowing Cost of Borrowing · always · High confidence less than 7%
    But overall, as you rightly mentioned and you are tracking us, that we are nearly 20 to 30 bps cheaper than anybody in the ecosystem as our peers. And overall cost is always remaining less than 7%.

    — Manoj Kumar Dubey

  • Borrowing Mix Cost of Borrowing · future · Medium confidence cheaper than G-Sec rate
    If you ask me the target, we are looking forward to a borrowing mix which is cheaper than the G-Sec rate.

    — Manoj Kumar Dubey

What to watch in Q4 FY26

AUM Growth towards INR 5 lakh crore

going ahead
Current INR 4.75 lakh crore
Target INR 5 lakh crore plus

Why it matters

AUM growth is a key indicator of the company's expansion and success in its diversification strategy, directly impacting future earnings.

I can only tell you that it is going to grow, and it should be somewhere INR 5 lakh plus going ahead.

Risks & concerns

  • Increased provision and write-off line item

    low

    Analyst noted a significant increase in provision and write-off. Management clarified it is standard asset provisioning as per new RBI guidelines effective Oct 1st, not related to NPAs.

    Analyst acknowledged

Q&A highlights

7 direct
Increase in provision and write-off Direct
You must be aware about the RBI guidelines. From 1st October onward, whatever assets that we are entering into agreement, there has to be mandatorily some provisioning to be done. So, it is those provisions which are just simply a provision. It is not NPA. So, this is for everybody now.

Clarified that the increase in provisions is due to new RBI guidelines for standard asset provisioning, not an indication of Non-Performing Assets (NPA), addressing a potential red flag.

Asked by Mohit Jain

AUM growth outlook for FY27 and beyond Partial
I can only tell you that it is going to grow, and it should be somewhere INR 5 lakh plus going ahead. This is what we envision here in the company.

Provided a ballpark figure for future AUM growth, indicating the company's ambition to reach over INR 5 lakh crore, which is a significant increase from current levels.

Asked by Mohit Jain

Competition in the non-railway ecosystem (40% diversification segment) Direct
we are inducing competition in the market, and we are very happy doing it. We are getting good competition with banks also. NBFCs are by and large not very competitive with us because of the fact that our overhead cost is low and our cost of borrowing is also cheaper.

Explained that IRFC welcomes competition in its new diversification strategy, leveraging its low overheads and cheaper cost of borrowing to maintain strong margins (100-120 bps) even against banks.

Asked by Mohit Jain

Execution timeline for INR 17,000 crore exposure where IRFC is L1 Direct
It is pretty much online. And agreements will be signed very quickly. There is no issue in that. All due diligence is in place. Legal things are being done. And as I mentioned in the first question, that generally for a greenfield project, normally two to three years, we disburse everything in the agreement.

Provided clarity on the typical disbursement timeline for large projects, indicating that the conversion of L1 bids into AUM will span 2-3 years, which is crucial for modeling future growth.

Asked by Amit Agicha

Long-term dividend payout policy Direct
Dividend policy is already in place. So, if you look at our dividends in the last five years we have been very steady in giving our dividends. This year, interim dividend was quite higher than what we paid last FY, and rest be assured if the PAT is growing, so dividends should also grow.

Reassured investors about the stability and growth potential of dividends, linking it directly to PAT growth, which is a key factor for income-focused investors.

Asked by Amit Agicha

Cost of funds and competitive advantage Direct
Cost of fund is apprx 7%. So, we can't give you the numbers, but if you look at our numbers, we raised our deep discount zero coupon bond at 6.80% for 10-year bullet payment. We raised 5-year bond sometime 6 months back at 6.5%. We raised our ECB loans in the Japanese yen at a very, very attractive rate.

Detailed the company's various borrowing costs and reaffirmed its competitive advantage of having a lower cost of funds (approx. 7%) compared to peers, which directly contributes to higher NIMs.

Asked by Deep Vakil

Asset quality of the 40% non-railway asset mix (A-rated, AAA-rated) Direct
We are cherry-picking even the GENCOs. We are not going for any GENCOs and TRANSCOs who are not rated A generally in the system. So, our cherry-picking in all the ecosystem that we are doing, it is up for to be seen by the investors or the potential investors.

Emphasized the company's stringent asset selection process, focusing on A-rated entities and cherry-picking within the ecosystem, which is critical for maintaining its pristine zero NPA record despite diversification.

Asked by Deep Vakil

Dip in NIM quarter-on-quarter and quantum jump in lease income Direct
NoThis disbursement of a larger amount took place right at the fag-end of Q3. But if you compare with last year, NIM of Q3, that was 1.4, and we have landed at 1.51. So, just here and there in a quarter-to-quarter, you may not have the right comparison. But going forward, last year in total FY, we clocked around 1.4, but this year we will be clocking more than 1.5.

Clarified that the Q-o-Q NIM dip was a timing issue related to large disbursements at quarter-end, and YoY NIM actually improved. Also explained lease income fluctuations due to deferred agreements from the previous year, which will accrue in future periods.

Asked by Gaurav Bansal

2 min read 6 chapters

Detailed narrative

Q3 FY26 Performance Overview and Strategic Shift

IRFC reported a strong Q3 FY26, with asset sanctions surpassing annual guidance and disbursements reaching approximately INR 22,500 crores, representing three-fourths of the INR 30,000 crores annual target. The company successfully transitioned into a multi-client diversification mode, moving from a single client system. This strategic shift has resulted in significantly better margins on new assets, estimated at 2x to 3x compared to those from Indian Railways, despite increasing competition.

AUM Growth and Future Outlook

Asset Under Management (AUM) demonstrated robust growth in Q3 FY26, increasing from INR 4.6 lakh crore to INR 4.75 lakh crore within the quarter. Management expressed confidence in continued quarterly growth for AUM, projecting it to reach INR 5 lakh crore plus in the near future. The company aims to add INR 3 lakh crore to its AUM over the next five years by funding 15 new entities, each with a potential funding of INR 15,000 crores.

Funding and Cost of Borrowing

IRFC successfully raised an ECB loan in Yen currency, described as very attractive and potentially the best in the market after a three-year hiatus. It also tested zero-coupon bonds, securing a good rate of 6.80% for a 10-year bullet payment, and previously raised a 5-year bond at 6.5%. The overall cost of funds is approximately 7%, with ECB loans (including hedging) at 6.2-6.3%. Management aims to maintain the overall cost of borrowing below 7% and achieve a borrowing mix cheaper than the G-Sec rate.

Net Interest Margin (NIM) and Profitability

The Net Interest Margin (NIM) for Q3 FY26 improved to 1.51% compared to 1.4% in Q3 FY25, indicating a positive year-on-year trend. While there was a quarter-on-quarter dip, management attributed this to the timing of large disbursements at the fag-end of Q3. The company expects to clock a NIM of more than 1.5% for the full FY26 and anticipates PAT and NIM to grow every quarter, driven by higher-margin diversified assets.

Asset Quality and Diversification Strategy

IRFC maintains a pristine zero NPA record, which it expects to continue even with diversification. The company is cherry-picking A-rated assets within the railway ecosystem, avoiding entities not rated A. Management clarified that an increase in 'provision and written off' is due to new RBI guidelines for standard asset provisioning, not actual NPAs. The capital adequacy ratio (CRAR) stands at nearly 160% against a required norm of 25%, providing ample room for growth.

Lease Income Dynamics

A minor dip in lease income was observed in the current period compared to the previous period. This was clarified to be due to deferred lease agreements with the Ministry of Railways from the last fiscal year. These agreements are expected to be executed in the current year, and their impact on lease income will accrue in future periods, suggesting a recovery in this revenue stream.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Financial Services earnings calls