I R F C

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.

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.

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.

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.

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.

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.