I R F C — Q4 FY24 earnings call

Call held 24 May 2024

Management summary

IRFC's FY24 was marked by zero fresh disbursements as railways shifted entirely to budgetary support. Despite this, financials remained stable through moratorium interest capitalization. CMD (Addl Charge) Uma Ranade outlined a 2-year window to diversify using the moratorium cushion, with the company actively exploring railway backward/forward linkages, renewable energy for railways, state JV projects, and multimodal logistics parks. However, no concrete deals or numbers were shared.

Highlights

  • Revenue at Rs 26,645 crores for FY24 vs Rs 23,721 crores in FY23

  • PAT at Rs 6,412 crores for FY24 vs Rs 6,167 crores (restated) in FY23

  • AUM at Rs 4.64 lakh crores; 98.94% exposure to Indian Railways

  • Zero disbursements in FY24 due to railways funded entirely by GBS (budgetary support)

  • Net worth grew to Rs 49,178 crores; gearing ratio at 8.38x; CRAR at 616%

  • ROE at 13.66%; ROA at 1.31%; NIM at 1.38%; EPS at Rs 4.91

  • Total dividend Rs 1.50/share for FY24 (interim Rs 0.80 + final Rs 0.70)

  • Operating expenses at 0.09% of total income - one of industry's lowest

Concerns

  • Zero fresh disbursements for entire FY24; no EBR allocation in interim budget FY25

  • New business diversification still at preparatory stage with no concrete deals

Key financials

  1. Revenue ₹26,645 Cr +12.3%YoY
  2. Profit After Tax ₹6,412 Cr +4%YoY
  3. AUM ₹4.64L Cr
  4. Net Worth ₹49,178 Cr
  5. Gearing Ratio 8.38×
  6. CRAR 616%
  7. ROE 13.7%
  8. NIM 1.4%
  9. EPS ₹4.91
  10. Total Borrowing ₹4.12L Cr
  11. Operating Expenses 9%

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.

Segment breakdown

  • Rolling Stock Lease
    35.5% AUM Share40 bps Spread
  • Project Lease
    20.4% AUM Share35 bps Spread
  • Advance Against Projects
    43% AUM Share
  • RVNL Loan
    1.1% AUM Share

Guidance & targets

Strategy

  • Diversification Timeline Strategy · FY26 · Medium confidence Within 2 years
    We have a period of about two years to get that thing in place... this is the time and the opportunity for us to make sure that we diversify our businesses.

    — Uma Ranade

Margins

  • Spread on New Business Margins · FY25-26 · Medium confidence Higher than IR spreads (industry standard)

    From 35-40 bps today

    It could be higher. Yes, definitely, it could be higher.

    — Uma Ranade

Risks & concerns

  • Zero fresh disbursements for entire FY24; no EBR allocation in interim budget FY25

    high

    Government shifted 100% to budgetary support for railways. Management waiting for full budget. No guarantee EBR will return.

    Analyst acknowledged

  • New business diversification still at preparatory stage with no concrete deals

    high

    CMD admits 'it would be difficult to share any kind of ballpark numbers' on new business. Only internal preparations underway - credit policy, appraisal team hiring.

    Analyst acknowledged

  • NII flattish at Rs 6,200-6,400 cr for 3 consecutive years

    medium

    CFO confirmed NII accretion limited to redeployment; lease agreement execution doesn't boost NII. Without AUM growth, NII stays flat.

    Analyst acknowledged

  • Restatement of Rs 790 crores in lease receivables due to accounting error

    low

    Short accounting of capital recoveries in terminal year discovered. Rs 620 cr restated to FY22, Rs 170 cr to FY23.

    Management acknowledged

Areas of evasion (2)

  • New business opportunity sizing not provided
  • Spread estimates for new ventures not given

Q&A highlights

3 direct
AUM Stability Mechanism Despite Zero Disbursements Direct
Although there has been no incremental disbursement during '23, '24, but there has been hardly any impact on my AUM. It has gone down only by 2,000 crores because we have capitalized our interest on the previous disbursement.

Rs 2 trillion in project assets under moratorium creates interest capitalization that offsets capital recovery, maintaining AUM. Critical to understand IRFC's accounting model.

Asked by Ritika Dua (Bandhan AMC)

NII Will Not Jump Despite Lease Agreements Starting Direct
After execution of the lease agreement, there will be an increase in the top line as well as in the finance cost. But the net accretion to the NII would remain same.

Investors hoping for NII jump when moratorium ends may be disappointed. Lease agreement signing increases both revenue and finance cost proportionally.

Asked by Ritika Dua (Bandhan AMC)

Two-Year Window for Diversification Direct
For the next two to three years at least... our financials are very robust and will continue like this. And this is the time and the opportunity for us to make sure that we diversify.

Management acknowledges finite window before moratorium cushion runs out. Successful diversification is critical for long-term viability beyond FY27-28.

Asked by Kaustubh Datta (Individual Investor)

1 min read 4 chapters

Detailed narrative

FY24 Performance: Stable Despite Zero Disbursements

IRFC reported revenue of Rs 26,645 crores and PAT of Rs 6,412 crores for FY24, growing modestly despite zero fresh disbursements. AUM held at Rs 4.64 lakh crores (down only Rs 2,000 crores) due to interest capitalization on Rs 2 trillion of moratorium project assets. Operating expenses remained industry-lowest at 0.09% of income. NIM at 1.38% and ROE at 13.66%.

EBR Dried Up as Government Shifts to Budgetary Support

Government allocated Rs 2.52 lakh crores in GBS for railways in interim FY25 budget with zero EBR requirement from IRFC. This continues the trend from FY24. Management awaits full budget for clarity but acknowledges the shift may be structural. The company's sole revenue source for 38 years has been essentially paused.

Diversification Plans - Early Stage

IRFC is exploring railway backward/forward linkages: rolling stock leasing to non-MoR entities, state JV infrastructure, dedicated freight corridors, multimodal logistics parks, and renewable energy for railways. Board approved credit policy, internal credit committees formed, and appraisal/technical agencies onboarded. However, no deals sanctioned or numbers shared. Management has a 2-year window before moratorium cushion expires.

Accounting and Financial Structure

AUM split: rolling stock 35.52%, project leases 20.37%, advances against projects 43.05%, RVNL loan 1.06%. Borrowing mix: bonds 48%, term loans 31%, ECB 17%, NSSF 4%. Weighted asset tenure 8.6 years vs liability tenure 7.4 years. Cost-plus model passes all risks (interest, currency) to railways. Lease period is 30 years (15+15 for rolling stock, 5+15+10 for projects).

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