Indian Railway Finance Corporation Limited (IRFC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Indian Railway Finance Corporation Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Puneet Chaturvedi from PhillipCapital. Thank you, and over to you, sir.

Thank you. Good morning, and welcome to the Q1 FY '27 Earnings Call of Indian Railway Finance Corporation Limited. Joining us today from the management team, we have Shri Manoj Kumar Dubey, Chairman, Managing Director and CEO; Dr. Ranjay Choudhary, Director, Finance; Ms. Deepa Kotnis, Executive Director, Finance and CFO; along with other members of the senior management team. So I would now like to invite Shri Manoj Kumar Dubey to share his thoughts on the quarter gone by and provide an outlook going forward. Over to you, sir.

Good morning, Puneet, and a warm welcome to all who joined this conference call for Q1 results of IRFC FY '27. So I'll just take you back to last FY, that was the year when we launched our IRFC 2.0 vision. So a small recap of what foundation that we made last year. Before that, IRFC was working on single client model and since FY '24, there was no business from the railways. So after 2 years lull, last FY, we started on diversification. And this company never had any experience of dealing with any other customer except Indian Railways. Challenge were daunting, but we knew our strength, a very pristine balance sheet, strength of very low overhead cost and strength of able to raise borrowings at a very attractive rate, better than anybody else in the country. We really use these strengths, and we charted in the territory where we had never been in the past. We gave ourselves a target also and the guidance that we shared with everybody around. It was a little challenging for the team -- the new team, which had not done this kind of business earlier, the kind of appraisal needed, the kind of other things required. But what happened in that the whole year, it was a kind of 100-meter race where we were doing everything that was possible to be done by a very professional NBFC company. And the results were really good, very overwhelming and very encouraging for the company. As you know, that last year against the guidance of INR 60,000 crores, we could sign agreements worth more than INR 75,000 crores. And against the target of INR 30,000 crores disbursement, we could disburse more than INR 35,000 crores. Now with the success that we had last year and the kind of growth in the business that was quite visible now, this year, we have declared ourselves as a year of consolidation and a year to plan for a midterm and the long term. Midterm is 2030 and the long term is 2037 for a 10-year plan. This company, as you know, as the name goes, Indian Railway Finance Corporation. So basically, this company for the 10 years also will be doing financing for mobility-centric assets mainly. Apart from that, all the allied sectors where there is a backward forward linkages, we did very well in last FY, those things will be continuing. Second plan and the business plan will be on will be, a, we remain the sole financing arms for the Indian Railways. And at the same time, diversification and asset acquisition in the other sectors, which are linked with the railways will continue. So what we did in Q1 is we have started working on 2 very important themes that this company has decided. One is fund in India. Now the fund in India means that for metro railways and for the Indian Railways also apart from GBA for the last 20, 25 years, if you look at, all the funding used to come from bilaterals and multilaterals directly. They had theirs pros and they had their cons also. Those were the era when Make in India was not very established in the country. So this fund in India is directly related to Make in India. 20 years later, when we talk today in 2026, almost everything required for the train running or mobility is being produced, manufactured, everything is done -- is being done in India, either by indigenous company or by the MNC or by the joint ventures. So with complete fund in India available in the country -- Make in India available in the country, fund in India is going to be an accelerator, a kind of theme which will bring synergy to the development at a very fast rate. Fund in India means that IRFC wants to be a conduit where the bilaterals or the any multilaterals, if they want to put money in India, they give this money to IRFC. IRFC leverages this money, makes a bigger kitty and it gives a bespoke solution to every customer in the whole of government approach. Now the word bespoke is also coined for the fact that we don't want to have only one model that you quote and I become L1 and I give you the money. No. Every customer will be given a kind of tailor-made solution to their requirement of finance. There are infra projects we -- who need funding for 30 years. There are infra projects who need funding for 20 years. There are government agencies who want to take the risk for currency fluctuations. There are a few who want to hedge at a little time. All these things will be taken into account, and we are planning multiple kind of models where we can offer it to the various customers. Apart from what we did last year, this year, we have already ventured out in metro railway arena. When I say metro railway, today, it is a very vast term because hand-by-hand, side-by-side with metro railway, the new concept of rapid rail, which already is proliferating in Delhi NCR is going to be a game changer in the future with the kind of smart city that India is perceiving. Apart from that, as it is in public domain, we all know that 7 high-speed rail corridors has already been announced and government is very, very serious to take it forward very quickly apart from one dedicated rail freight corridor. Now the total expenses or the planning of the financing is in tune of INR 60 lakh crore for high-speed rail corridor or nearly INR 3 lakh crores for DFC coming out to be around INR 20 lakh crores. IRFC is actively working for being part of this financial solution. And we believe that these 2 works will have a pipeline for IRFC for more than a decade with as a ballpark figure, more than INR 50,000 crores, INR 60,000 crores of disbursement every year. This going forward should become the mainstay of the company. And apart from that, Metro and rapid rail things should bring around INR 20,000 crores to INR 30,000 crores every year. And GenCo and port and other things where we are already venturing will be another area where things will be coming. So going forward, this year, we are in process of making a plan for around INR 50,000-plus crores of disbursement for the next decade. We are working on that. And while working on that, this year also, the kind of guidance that we had given last year, that remains intact for us. Q1 is always a slower year for the disbursement. But as you saw last year, last FY, Q2, Q3, Q4, our disbursements will also pick up. And we are sure that we'll be doing what we did last year or even better than that. So far as numbers are concerned, it is already there. A good thing for this IRFC team is that every quarter, we are making higher than higher. So this year also, almost everything right from the revenue numbers to PAT numbers, everything is highest ever in the history of the company. We, as a team, are also geared up during the discussions. I'll also talk about the appraisal part and the team building part. Those things will come up, and I'll have long discussions those also because this year, consolidation means putting everything in place in this FY for a very long journey and a successful journey that IRFC is investing for 10 to 20 years horizon. Thank you so much.

Should we begin with the question now? [Operator Instructions] The first question is from the line of Mohit Jain from Tara Capital.

Congrats on a decent number sir. Sir, first of all, I just wanted to have your view as to how we are looking at the disbursement and the AUM growth this year. Obviously, Q1 was slightly tepid, you also highlighted. And even AUM, we had a slight decline. So do we hold to that guidance of touching INR 5 lakh crores as a AUM in half year? And where do we see ourselves ending the year with in terms of AUM and disbursement growth?

So as I told you right in the beginning, Q1 is always sluggish and slow for the kind of disbursement because we don't have a very big pipeline right now. So yes, we are looking forward to a few refinancing assets also in the future in this FY itself. So as I said, Q2, Q3, Q4 disbursement will pick up. The slight decrease in AUM that you found on the accrual basis, whatever payment has to come back from the railways, we always take into account a decrease in our AUM for the quarter 1, although it will come in September. But as per our Ind AS system, we always take equal proportionate hit in every quarter for decrease. Now disbursement in this quarter is not very high as we did last year also, it is around INR 2,000 crores itself. But going forward, as I said to you, that will be picking up and the guidance that I've given right in the beginning of the FY that whatever we did last year, we intend to surpass that in this year also. And going forward, we are working, as I told to you about this high-speed rail corridor and DFCCIL, things are looking very bright for us.

Sir, any number you want to give...

End of the year, our AUM will be better than what we closed last year on the net basis.

Yes, sir. But any growth guidance that you would like to give in terms of AUM, how much like we expect in terms of growth?

I told you, we ended up last year at INR 4.84 lakh crores. And this year, whatever repayment -- I mean, payment will come back from railways. That will always be deducted from the net of AUM. But whatever we'll disburse this time will be more than that. And we'll be hoping to catch around INR 5 lakh crores by the end of the year. That guidance remains intact.

Okay, okay. By the end of the year, we'll be catching INR 5 lakh crores, sir. Perfect.

And the impact on PAT and NIM will be like this only because whatever we'll be adding will be nearly 100 bps or even more than that kind of margin. And whatever will be deducted from my AUM will be 35 bps or 40 bps margin things. So on a net basis, my PAT will show a growth. My NIM will show a growth. So all the yielding kind of thing, all the ratios and parameters will show better output even if we are not going very huge in terms of our AUM. And that is the game plan for this company.

Got it, sir. Got it. So the focus is going to be more on the bottom end than the AUM growt, sir.

Obviously, we are already INR 5 lakh crores. So I have given you enough indication when I talk about something on the plateau in tune of INR 20 lakh crores, which is public [ domain ]. It is not that I'm telling you. If you follow my honorable minister, you see what he is talking about, about high-speed rail corridors and these things. So obviously, these are railway projects, highly capital intensive. INR 20 lakh crores will not come from the GBS. In the past also, it has not come from the GBS. Last time, all DFC, both DFCs were funded by World Bank and JICA loans. So this time, why we talked about fund in India? Fund in India means that anything that will go to these agency, we are trying to make a solution where it will go through IRFC. We are sitting on the volcanos of business, you see that. But yes, this is a business -- this is a year when we are trying to make a solution for that, very robust solution so that this becomes our mainstay for next decade.

Got it. Got it. And sir, on the NIM, so I understand directionally, our NIMs will improve because obviously, the mix is going to change in favor of higher-yielding assets. Sir, last quarter, we highlighted that this year, we are expecting our NIMs to touch 1.65%. We are at 1.48% in Q1. We still expect...

Once you meet to me in Q4, you will find that, that is happening because by Q4, we'll be reducing the low NIM kind of business from our AUM and putting more of the high margin businesses into it. So it will have. Interestingly, I'm not making comment about any particular financial institution. You will be following more than me. I'm also following the results of last FY and Q1 of all the financial companies, including banks and NBFC. I am again reiterating everybody is playing on the turf of IRFC now. Okay. We are going to be the game changer. If you are following the rates being quoted on the open tender of any of the GenCo and transport, you see what kind of rates are coming now. We are very comfortable at 8%. Others were never lending at 8%. So beneficiary is the country, country as a whole. So now onwards, the kind of low overhead cost that IRFC is maintaining and transferring the [ efficiency ] to the customers, every other competitor or the sibling in the ecosystem are forced to bring in that efficiency. Otherwise, their NIM will have an impact. My NIM is not going to have an impact. I'm going to work at 8% also making a margin of more than 100 bps. Others perhaps will have difficulty. And if you look at the numbers, everybody's NIM is decreasing across the board. We have a very small base of 1.50. So we believe that in the next decade, our NIM will keep growing and growing.

So basically for the full year, the NIM to be above 1.65% or is it going to be the quarter 4 NIM...

1.65 % -- you say 1.65% is not -- I mean, [indiscernible] figure. What we feel that 10 basis points, my NIM should grow on an average every year. That remains intact. And that is what we are very meticulously working forward to. And we will reach 2% NIM by the end of 2030. That is the target for the company.