INDIAN RAILWAY FINANCE CORP Q3 2026 Earnings Call Transcript

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, a reminder. If you wish to ask a question, please press star and 1. We take the first question from the line of Mohit Jain from Tara Capital Partners.

Please go ahead.

Mohit Jain

Hello. Hello, can you hear me? Good morning sir. So, just wanted to have your explanation for the amount which is appearing in provision written off as a line item there. It has increased significantly in the current quarter. What is the reason behind it? Because I guess we still don't have any NP in our books.

Manoj Kumar Dubey

You must be aware about the RBI guidelines. From 1st October onward, whatever assets that we are entering into agreement, there has to be some mandatory, some provisioning is to be done. So it is those provisions which are Just simply a provision. It is not npa.

So this is for everybody now. Yeah, your voice is not coming clearly. Yeah, please go ahead.

Mohit Jain

Yeah, I'm saying. So these are standard asset provisions basically.

Manoj Kumar Dubey

Yeah, yeah, yeah. It is a standard asset. Absolutely. Absolutely.

Mohit Jain

Okay. Okay.

Manoj Kumar Dubey

So otherwise you can add this 50 crore into our profit and you can safely say that our profit is 1850 and nearly 13%, not 10%. Two years. Right.

Mohit Jain

And sir, as regards to am I, I got the view that you know that's going to increase on a quarter, on quarter basis, any sort of a number or any sort of a growth rate that we can look forward for, let's say for FY27. Right. Now.

Manoj Kumar Dubey

You see when we started the year we were really under hard press conditions because for the last two years, nearly three years in fact there was no disbursement to the railways which used to be our single client. Now you see how quantum jump is taking place. So in one quarter itself we jumped from 4.6 lakh crore to 4.75 lakh crore. There are two things. One, our base is very big. So we are not a small NBFC. It is already, I mean 4.75 lakh crore. There are not many of the NBFCs which are running this balance sheet size.

So yes, what I said that we'll be doing positively for the fact that whatever reimbursements will be coming from the railways for the old loans that we've given will surely be disbursing more than that. Now how much more is a question which I mean we are also looking to answer for the fact that there are two good things about us. We are not looking for any small ticket kind of business. So we are strictly into B2B and our efforts are that we should look for the clients which are having potential of raising around 10,000 to 15,000 crore from us.

And one ticket is not less than 5,000 crore. This is the kind of B2B system we are looking forward to. So if say three or four more assets we garner in the Q4, so you will put the numbers, I mean disbursement norm. Typically for a greenfield project it takes three to four years. You disburse everything. So numbers we won't be putting. But I can tell you one ballpark figure that this company A1 will be hovering around 5 lakh crore which is not a small thing, A B this 5 lakh crore plus minus whatever we will be having for next three to five years, more and more assets with bigger margins will be added up.

The Morning at cnbc and other TVs also spoke about that in the next five year plan, 2030 plan that we have made. In this 2030 plan we are looking forward to a mix of 60, 40, 60 coming from the Indian Railways and 40% of the mix coming from the railway ecosystem where the margins are nearly three times of what we get from the railways. So better you put number on our name, better you put a number on our path. Aom, I can only tell you that it is going to grow and it should be somewhere 5 lakh plus going ahead.

This is what we envision here in the company. And some sorry on the timeline for the 5 lakh growth is it like a 2030 target or in the near future only? I mean what we have set forth is five year target where we are looking forward to 20 new entities for us for whom we are doing cherry picking and appraisal. These 20 entities we intend to fund around 15,000 crores each. So 3 lakh crore we wish to add through 15 entities only in the next five years. So we are sitting over here at 4.75 lakh crore, 3 lakh crore we want to add in next five year time through this 1520 clients.

It comes out to be nearly 8 lakh crore. So there will be some reimbursement from the railways also. So that is why I'm not putting a specific number. What I answer to you is that we believe that going forward AUM of this company will be 5 lakh crore plus.

Mohit Jain

And so just one clarification on the 40%, the non non railway ecosystem that we are looking forward to, are we facing any kind of a competition? Because the other players, the PSU players in the private, in the space, basically they are having a slower growth rate right now and they have become, they are to becoming more competitive.

So are we facing any competition out there in the 40% piece?

Manoj Kumar Dubey

Mohit, we are here for competition. In fact we are, we are inducing competition. We are strictly not in favor of any across the table discussions. We are a government company. In fact anybody who is coming to us for across the table lending also we are advising them to come out with the open rsp, right? And yes, the answer to the question is there's a very healthy competition for us for the fact that we are looking only for pristine best kind of assets. So the moment you look for those kind of assets which are A rated, triple A rated, obviously there is competition.

But it suits us, it suits us on two counts. One, it endorses our view for 0 NPA kind of asset. Two, we were working all the way for 40 base margin. So we are getting 100 base margin, 120 base margin despite the competition. So our name is going ahead. So the answer to the question is competition. We are inducing competition in the market and we are, we are very happy doing it. We are getting good competition with banks also. NBFCs are by and large not very competitive because of the fact that our overhead is low and our cost of borrowing is cheaper but few kind of assets at times.

Banks are really competitive with us and we are very happy competing with both the kind of entities.

Mohit Jain

Thank you. Thanks a lot.

Operator

Thank you. We take the next question from the line of amit Agija from H.G. hawa and Company. Please go ahead.

Amit Agicha

Good morning. Am I audible?

Manoj Kumar Dubey

Yes, please go ahead.

Amit Agicha

Yeah. Thank you for the opportunity. Congratulations for good set of numbers. So what is the expected execution timeline for 17,000 crore exposure where IRFC has emerged as L1 and how much of this can realistically flow into FY27 AUM?

Manoj Kumar Dubey

It is pretty much online and if you have information from somewhere, it is on the line 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 the first question that generally for a greenfield project, normally two to three years, we discuss everything the agreement

Amit Agicha

and. Is there a long term dividend payout policy that investors can anchor to like, especially like given the company's stable cash flow and nil credit costs.

Manoj Kumar Dubey

Please say it again.

Amit Agicha

Yeah. Is there a long term dividend policy?

Manoj Kumar Dubey

Yes, dividend policy is already in place. So I mean if you look at our dividends in the last five years it will give us very because we are a government company on the lighter end, you know how it does, how it pans out. So if I understand correctly, we have been very steady in giving our dividends this year. Interim dividend was quite higher than what we paid last FY. And as we assured if the PAT is growing, so dividend should also grow. This is my understanding. But the final call is taken by the board.

Amit Agicha

And so the last question from my side, like how does management internally benchmark the company's valuation as a sovereign proxy, an infrastructure NBSC or a utility like N business.

Manoj Kumar Dubey

So let us hear from our BD head. Currently we are focusing on the good quality asset and and then we are following the whole of the government of India approach and in near future we are emphasizing that we will be funding only to the government entities and the the entities which which have a strong linkage with the government. I mean going forward we will intend to fund only those infra project which has a backward and forward linkage by following the whole of government India approach.

Amit Agicha

Thank you for the detailed responses and all the best for the future. Thank you.

Manoj Kumar Dubey

Thanks Amit.

Operator

Thank you. Ladies and gentlemen, if you wish to ask a question please press star and 1. We take the next question from the line of Deep Vakil from Bandhan amc Please go ahead. Good morning Samna Audible yes please go ahead sir.

Deep Vakil

My. I mean I've been tracking IRFC since a couple of quarters on call. So what I understand is that our cost of funds is the lowest in the industry which is approximately sub 5% and earlier we used to make margin of 40 bips on railway projects which is now hundred bips on. I mean in the diversification plan 2.0 apart from railways and. But you have been. I mean earlier there was no need of credit underwriting or something on those lines because it was. I mean Indian Railways is sovereign so there was no risk of default.

But considering now we are moving into 60 to 40 trajectory with around I mean 20 odd new exposures being added of around 15,000 crores each in next five years. So I mean, I mean I heard that you mentioned it all those entities will be linked to GOI backwardly or forwardly. But do we have some benchmark that it will be all AAA rated? I think you gave loan to NTPC so I mean there are still risk of NPA remains nil in this IRFC 2.0 approach as well or because the competition is pretty healthy as you mentioned.

But I mean the only benefit what we have is the lowest cost of funds. So can you just throw some light? Why why we have that benefit and what is the cost of funds as of. I mean the recent weighted average cost of borrowing.

Manoj Kumar Dubey

So you understand the fact that you mentioned in the beginning that whatever low overhead cost that we had earlier it was all being passed on to Indian Railways as a single client. Now that we are giving loans to the entities who are having any linkages with the railways. Of course this 70 to 80 bps benefit that we had lower cost of overhead that is being now divided between the customer as well as ourselves. So nearly I believe 40 to 50 bits is coming out of that low overhead cost to our KTH profit. Perhaps you want to know about our risk factor that going ahead with 40% alone.

So you see we funded one for DFC Dedicated Freight Rail Corridor. We funded for NTPC all our assets are all in public domain, you can see their ratings. We are obviously going for all A rated assets. We are cherry picking even the Gencos. We are not going for any Gencos and transcodes who are not rated A generally in the system. So our cherry picking in all the ecosystem that we are doing it is up to be seen by the investors or the potential investors. We believe that those government entities which are having very strong balance sheet, strong cash flows and the kind of new venture that they are going in there is absolutely negligible chance of NPA A B yes as per the RBI guidelines even for entity like DFCCIL where the payments will be coming directly from DOI to us still provisioning norms are there for CA for capital adequacy as well as for the assets.

So yes those things will be there. But you know our capital CR today also is nearly 160% again the norm of required number of nearly 25%. So we have a lot of legroom still to go for these kind of assets. A B as you said provisioning has to be done and it is being done by everybody in the in the line of RBI guidelines. So those provisions are just a provision, they are not any actual cash hit on the balance sheet. So yes we are entering into the ecosystem other than railways but our appraisal team is very very particular about the fact that what kind of assets we are cherry picking and that will remain our mainstay and we believe that by having this kind of scenario within the whole of government approach we believe that we will be able to maintain our pristine zero NPA system going ahead.

Also

Deep Vakil

sir, and what is the cost of funds? Weighted average cost of funds as on date?

Manoj Kumar Dubey

You see cost of fund is sub 7% so we can't give you the numbers. But you know if you look at our numbers we raise our deep discount zero coupon bond at 6.80 for 10 year bullet payment. We raise five year bond sometime six months back at 6.5%. We raise our ECB loans in the Japanese yen at a very very attractive rate and even if we add a five year hedging cost on that it is coming somewhere around 6.2 6.3. So if you add all together with the repo rate coming down our RTL also is quite attractive nowadays so it keeps varying every year depending upon the mix and the kind of rate that is being offered in the market.

But overall as you rightly mentioned and you are tracking us that we are nearly 20 to 30 bits cheaper than anybody in the ecosystem as our peers. And overall cost is always remaining less than 7. This is what now at times it may be quite attractive even to 6.5, 6.6 level. If you ask for the target, we are looking forward to a borrowing mix which is cheaper than the G SEC rate. This is what at RFC we are aiming for. I hope I answered your question.

Deep Vakil

Yeah, sir, last question. Broadly, I mean it's all floating rate link, right? External benchmark or eblr. I mean eventually,

Manoj Kumar Dubey

not necessarily, not not necessarily. When you are going for the. I mean we have got all kind of mix a bond of course bondage effect. So if you are buying any 5 year tenure, tenure bond or 15, 10 of bond raised or 6 banks of course it is linked to either T bill or repo rate, whatever you have in ECB market it is linked to the currency fluctuation mainly and of course the hedging cost. If you are going to hedge

Deep Vakil

still. After adding 100 to 120 bids to this still, I mean our rates are still competitive as compared to competition rate which is primarily banks.

Manoj Kumar Dubey

So that is why we are winning the bids but we are losing few also. It's not that we are bidding, we are winning everything we are bidding. That is a best part. And you know one of the good things that we take out of participating into rfp, you know, whatever assets we have participated, participations were as long as large as seven to even 15 participants from the financial sector. That is a reinforcement of the fact that we are entering into the area where 10 to 15 companies are doing their due diligence and they are finding the assets at pristine.

So whether we win the bid or we lose the bid, we are clear about one thing, that the jury is out on that asset, that it is a good quality effect. And that is something which is very, very important for irsc.

Deep Vakil

Right sister? One last thing. I mean as you mentioned that 40% asset will be majorly A rated. So just want to understand, I mean is it only a double A or AAA rated or we have some benchmark that we'll cater.

Manoj Kumar Dubey

I mean let us not go into, let us not go into those details. The overall thing as an investor you will know that we are going for aerated rest board has its own powers and they look at every asset in a different manner. And finally everything is in sanctioned by the board and board of IRFC is very, very particular about ensuring that the asset quality should be very, very good.

Deep Vakil

Congratulations sir. Thank you,

Manoj Kumar Dubey

thank you,

Operator

thank you. Ladies and gentlemen, if you wish to ask a question, please press star and 1. Ladies and gentlemen, if you wish to ask question please press star and 1. We take the next question from the line of Vikas from Focus Capital. Please go ahead.

Vikas Gupta

Good morning sir and hearty congratulations to you on this fantastic performance last quarter. So just one question. In your answer to the previous participant you said we don't win all the bids, Some of the bids, you know, we don't know what the reason for us to not win given that we would be among the lowest competitors.

Manoj Kumar Dubey

It's a competitive bid. Every company give their bid and we also gave our bid which is the best suited to us. So in the market you do not know that which company will give what rate. So it is just a healthy competition, nothing else. So to add to my director Finance, you know, banks today with deep cutting repo rates for few of the assets where they don't have exposures. At times one of the banks get very, I mean aggressive in quoting. So that's fair enough. That's fair enough. So that is why we are very open to talk about it.

It's not that every bid, despite having the strength of low overhead cost and low cost of. It's not that every bid we are winning and that's very good about it. Banks mainly and not every bank. I mean there are, you know more than the 10 banks are participating. So one of the banks at one time they become very aggressive for one session there they are winning it. But yes, our strike rate is more than 60% in whatever bits we have participated.

Vikas Gupta

And one request, sir, if you could just. Earlier we used to have shared investor presentation. If you could just share the same thing and also give us a sense of your how your liability mix is and some of the questions that the earlier participants also asked because of borrowing or some of the what do you say your liability makes and so on could be very helpful, sir.

Manoj Kumar Dubey

Noted, noted, noted. Please not.

Vikas Gupta

Thank you sir and wish you all the best.

Manoj Kumar Dubey

Thank you.

Operator

Thank you. We take the next question from the line of Gaurav Bansal from PVC consultancy. Please go ahead.

Gaurav Bansal

Yeah, good morning. My question is that there has been a dip in NIM and substantial increase in the lease income. Any particular reason for that? Did you find dip in nim Visa be last quarter or general?

Manoj Kumar Dubey

No, no, you understand it, you understand this. This disbursement of a larger amount took place right at the fag end of Q3. So but if you compare with last year NIM of Q3 that was 1.4 and we have landed at 1.5. 1. So just here and there in the quarter to quarter you. You may not have the right comparison but going forward last year in total FY we clocked around 1.4.

But this year we'll be clocking more than 1.5. So that dip is mainly because of fact that this was one took place only in the five end of Q3. It. I get it. And how about the quantum jump in the lease income?

Gaurav Bansal

Quarter to quarter again. Quantum jump, Lease income. Yeah.

Manoj Kumar Dubey

So. So there's a yes here from our account he'll be talking about. Yeah. Good morning. Morning. Yeah, basically the. The lease income operates based on the lease agreement what we entered with the Ministry of Railways. So in current, in last year we didn't execute the any lease agreement with the Ministry of Railways so it got deferred. So in the current year we are going to execute the lease agreement what was due last year as well as in the current year. So the impact of those lease income will accrue in the future periods. That's why there is a reason there is a minor difference in the lease income in the current as compared to the previous period.

Gaurav Bansal

Okay, got it. And is there any plans for any buyback? I mean looking at the share price dipping and is the company planning to buy back to shore up the prices?

Manoj Kumar Dubey

I mean we are the board of the company. We don't decide for buyback or selling of shares. It is the domain of Department of Ministry of Finance Deepam. So they are the real owners sitting on 86% of shares. If they take a call, they'll be telling the market about that. Right,

Gaurav Bansal

I get it. Thank you so much.

Operator

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and 1. As there are no further questions, I will now hand the conference over to the management for their closing comments.

Manoj Kumar Dubey

Thank you. Manish. We had a good outing in quarter three and we believe that going forward also the stellar show in terms of the numbers will continue. And we are sitting in a pretty good condition now having a good pipeline with us. Yield also is looking up. So going forward, the diversification plans that we have launched in the beginning of the fy now is the time to consolidate on that. And going forward we believe that all the kind of guidances that we have given will continue to achieve those things. Thank you.

Operator

Thank you on behalf of Philip Capital India Private Limited. That concludes this conference call. Thank you for joining us. And you may now disconnect your lines.