Indian Railways

IRFC IPO: Why You Should Buy It!

Indian Railways Finance Corporation, abbreviated as IRFC, is the financial wing of Indian Railways. It works for the development of the Rail Transport Sector while maintaining its symbiotic relationship with the Ministry of Railways. It is one of the leading financial services companies in India which raises funds from the capital market at competitive cost for augmenting railway plan finances, duly ensuring that the corporation makes optimum profits from its operations. After the launch of IRCTC IPO, its the IRFC which is going to start its initial public offering (IPO).

What is IRFC IPO?
IRFC has sent draft documents for its initial public offering (IPO) to the Stock Exchange Board of India (SEBI). According to the draft red herring prospectus (DRHP), the public issue is up to 140,70,69,000 equity shares of which up to 93,80,46,000 equity shares are fresh issue, and up to 46,90,23,000 equity shares are offered for sale.
IRFC IPO Cash Price / Band Price: The face value of each share is Rs.10, and the cash price of the IRFC IPO is not known yet. 

Who are the promoters of IRFC IPO?
There are mainly three promoters for Indian Railways Finance Corporation IPO:

  1. The President of India
  2. Acting through the Ministry of Railways (MoR)
  3. Government of India

Key People in IRFC

  1. Vijay Babulal Shirode, Company Secretary and Compliance Officer
  2. Ashutosh Samantaray, Additional General Manager (Finance)
  3. N.H. Kannan, General Manager (Finance)
  4. Prasanta Kumar Ojha, General Manager (Finance)

IRFC IPO Share Offering
The SEBI issued the observation letter to IRFC on 25 February 2020. Any business requires the SEBI observation letter to launch public issues such as IPO, follow-up public offering and rights issue.
Net Issue: 140,70,69,000 equity shares
Fresh Issue: 93,80,46,000 equity shares
Offer for Sale: 46,90,23,000 equity shares
The company’s shares are expected to be listed on both BSE and NSE.

IRFC IPO Release Date
The release date for the initial public offering of IRFC is not yet confirmed but it is expected to be launched very soon in the future. Along with that, the minimum amount to invest in IRFC IPO and other details will soon be updated on our website. So keep visiting the website for further information.

History of IRFC
Over the last three decades, IRFC has played a significant role in promoting Indian Railways’ capability enhancement by financing a proportion of its annual program outlay. They are wholly owned by the Indian government which acts through the MoR.
IRFC is registered as a NBFC (Systemically Important) with the Reserve Bank of India. IRFC is listed under the category of “Infrastructure Finance Company” under Section 45-IA of the Reserve Bank of India Act, 1934. On October 8, 1993, the Indian Railways Finance Corporation (IRFC) was registered as a “Public Financial Institution” under the Companies Act, 1956 through a notification provided by the Ministry of Corporate Affairs.

Business Strategy of IRFC
The business strategy model of IRFC is an inspiration for other companies as well. IRFC is able to handle financial assets of Indian Railways for the past 3 decades. Following are the top strategies followed by IRFC:

  1. Diversification of borrowing portfolio
  2. Broaden their financing portfolio
  3. Continued focus on asset-liability management
  4. Provide advisory and marketing services, and participate in syndication activities

Recommended Read: Indian Railways Launches RTIS: Real Time Train Information System

Indian Railways Finance Corporation Leasing Model
IRFC follows a financial leasing model for financing different types of rolling stock assets. The lease term for rolling stock assets usually is 30 years, comprising a primary 15-year term followed by a secondary 15-year period, unless otherwise amended by mutual consent.
With regard to the leasing contracts, the principal amount of the leased properties is essentially payable over the primary 15-year lease duration, along with the weighted average borrowing costs and a margin calculated by the MOR in consultation with them at the end of each fiscal year.

Indian Railways Finance Corporation (IRFC) Credit Ratings
IRFC holds the highest credit scores available on both domestic and foreign borrowings by an Indian issuer. CRISIL–CRISIL AAA and CRISIL A1+, ICRA –ICRA AAA and ICRA A1+, and CARE–CARE AAA and CARE A1+ have earned them the highest credit scores.
The company has also been awarded the rating of Baa2 (Negative) by Moody’s, the rating of BBB-(Stable) by Standard and Poor’s, the rating of BBB-(Stable) by Fitch and the rating of BBB+ (Stable) by the Japanese Credit Rating Agency which is on par with the rating of India.

How does IRFC Help Indian Railways?
IRFC plays a major role in financing the growth of Indian Railways. Due to diversified sources of funding and strong credit ratings in India, IRFC has managed to borrow money at competitive costs. The funds raised by IRFC are used to fulfil Indian Railways’ development needs and also to purchase rolling stock assets such as locomotives, coaches, wagons, trucks, flats, electric multiple units, containers, cranes, trolleys of all kinds and other items. The company has intended to raise Rs 1,000 crore (with an option to retain over-subscriptions up to Rs 8,886 crore) as part of its business operation by issuing guaranteed non-redeemable tax-free bonds.

Lead Managers for IRFC IPO
These are the lead managers for Indian Railways Finance Corporation IPO:

  1. IDFC Securities Limited
  2. HSBC Securities and Capital Markets (India) Private Limited
  3. ICICI Securities Limited
  4. SBI Capital Markets Limited

Who is the registrar to the IRFC IPO? If you are also looking for the answer to this question then we have an answer. The registrar to this issue is KFin Technologies Private Limited.

Points to Remember Before Investing in the IRFC IPO

  • The net proceeds are expected to be used to raise the capital base of the company in order to satisfy future capital needs.
  • The IPO issue objects of IRFC are: Increasing their equity base to meet their potential capital needs resulting from growth in their business, and General corporate purposes.
  • The company has been able to diversify its borrowing portfolio at a reasonable market rate per year by issuing taxable and tax-free bonds, term loans from banks / financial institutions in addition to offshore borrowing.
  • The issue price is calculated by the company in consultation with the Lead Manager, based on various qualitative and quantitative factors.
  • Qualitative factors for the issue price of IRFC are:
        1. Strategic position in Indian Railways’ growth financing
        2. Competitive borrowing costs based on high Indian credit ratings and diversified funding sources
        3. Consistent financial results and cost-plus model 
        4. Low risk business model
        5. Good asset-liability management
        6. Competent senior management and dedicated team
  • Quantitative factors for the issue price of IRFC are:
Basic & Diluted EPS RONW in % NAV (Rs.)
31-Mar-17 1.41 7.67
31-Mar-18 3.14 15.71
31-Mar-19 3.43 13.87 19.81

Is IRFC IPO Beneficial in 2020?
For all stock market investors out there, it is a good news that the Indian Railways Finance Corporation (IRFC) has started its IPO. Its share prices are expected to increase many times since it is launched so make sure that you purchase as many shares of IRFC as you can. There are multiple options for buying the shares of IRFC. Do consult an expert before you invest your money in the IRFC IPO. It can definitely be said that the IRFC IPO is a beneficial option in 2020. 

Review of IRFC IPO by Top Companies
Looking for IRFC reviews or IRFC IPO ratings? You are at the right place. Look for ratings of IRFC prior to investment so that you can understand why this IPO is good for you.

Top Stock Brokers Review Company Reputation Competitive Edge Financial Statement Popularity Index Promoters Reputation
Angel Broking 7.5/10 7.4/10 8.5/10 8.1/10 7.1/10
Sharekhan 7.2/10 7.1/10 8.6/10 8.1/10 7.2/10
Kotak Securities 7.3/10 7.5/10 8.4/10 8.1/10 7.3/10
ICICI Direct 7.3/10 7.3/10 8.7/10 8.1/10 7.1/10
IIFL 7.5/10 7.2/10 8.8/10 8.0/10 7.1/10
Edelweiss 7.5/10 7.4/10 8.4/10 8.3/10 7.2/10
Zerodha 7.4/10 7.1/10 8.5/10 8.1/10 7.0/10
5Paisa 7.1/10 7.1/10 8.4/10 8.1/10 7.1/10
Karvy 7.4/10 7.3/10 8.2/10 8.1/10 7.1/10
Motilal Oswal 7.1/10 7.1/10 8.6/10 8.3/10 7.2/10

Now that you know about the ratings and reviews of IRFC IPO, you should decide if this investment in IRFC is right for you.

Don’t forget to order food online in train while travelling to make your journey happy and healthy.

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Author: Rohit Choubey

Rohit is an avid blogger as well an eminent digital marketeer. He has immense passion towards food blogging. His hobbies include travelling, cooking and watching movies. He is the content analyst for RailMitra.