Is there any indication of corporate tax liability materializing before 2030?
For the next 5 to 6 years, there is no expected corporate tax liability. Management guides investors to revisit this topic around 2030. The tax benefit derives from unabsorbed depreciation on leased assets and the election of Section 115BAA which also exempts IRFC from MAT.
Is NIM expected to structurally improve, and is AUM of INR5 lakh crores expected by end of this financial year?
NIM will structurally improve going forward. On AUM, the target of INR5 lakh crores is for FY27, not the current year. With the flood of queries and disciplined cherry-picking for quality assets, management is confident in the growth trajectory.
Is there any discussion to extend the primary lease period from 15 years to 25 years to reduce strain on Indian Railways finances?
This is a matter for Indian Railways to decide, not IRFC management. If a proposal comes from their side, IRFC has no objection to increasing tenure. Currently, there is nothing on the platter. This is not an appropriate topic to discuss with investors.
For external borrowings, are forex risks fully hedged?
It is a mix. Shorter-tenure loans (within 5 years) are hedged. For longer tenure loans, IRFC waits a few years to get better yield before hedging. IRFC has multiple hedging models depending on tenure.
What yields are expected on the INR23,000 crores of sanctions for the year — such as in the NTPC deals?
Spread charged varies by customer based on asset quality, tenure, and credit rating — in the range of 70 to 150 bps on a case-to-case basis. Customer-wise numbers cannot be shared.
How is your cost of capital at 5% when government bond yields are at 6.2-6.3%?
The apparent low number is because of the business model. IRFC funds two types of assets — project assets and rolling assets. Around INR2 lakh crores of project assets have moratoriums and the interest cost is capitalized (added to the loan amount) rather than flowing through P&L. The actual cost of capital is around 7%, which is still cheaper than peers.
Guidance was for INR30,000 crores disbursement in FY26 but Q1 shows only INR2,500-3,000 crores disbursed. How will the annual target be met?
The sanctioned pipeline stands at nearly INR25,000 crores. Many sanctioned projects are refinancing in nature, which means the entire amount is disbursed in one go. Management expects more than INR10,000 crores disbursement in Q2, making H1 nearly 50% of the annual target. The company is on track to meet or exceed the INR30,000 crore full-year disbursement guidance.
Given annual moratorium repayments of ~INR10,000 crores, should we expect loan book growth going forward?
Correct. In Q1, IRFC just broke even at INR4.59 lakh crores of AUM — nearly INR400 crores down from last quarter. Going forward, every quarter will show decent improvement in AUM. Management foresees AUM crossing INR5 lakh crores in FY27.
What are the new disbursement yields versus current book yields, and what explains the NIM improvement this quarter?
NIM for Q1 is 1.51, up sharply from 1.31 in the prior quarter. New businesses outside of Indian Railways are not on the fixed 35-40 bps cost-plus model. IRFC competes for quality assets with margins 2 to 3x what it used to get from Indian Railways. For new assets, NIM will be more than 2%. The large legacy book at 40 bps and 35 bps dilutes the overall NIM improvement in the near term, but every quarter NIM and PAT yield are getting better. Q1-to-Q1 PAT growth was nearly 11%.
What is IRFC's linkage with NTPC, which is in the power sector rather than railways?
NTPC is one of the biggest suppliers of power to Indian Railways. Railways need 8 to 9 gigawatts of power, 90% from non-railway sources. As railways aim for net zero by 2030, all renewable project companies getting into PPAs with Indian Railways become IRFC's direct clients. A joint venture of railways called REMCL facilitates such arrangements. IRFC expects to fund anything in the renewable space supplying to Indian Railways, approximately 8 gigawatts over the next 5 to 6 years.
Why does IRFC not pay corporate tax?
IRFC follows a leasing business model with unabsorbed depreciation on assets leased to Indian Railways. From 2018-19, IRFC elected Section 115BAA which exempts it from MAT. The accumulated unabsorbed depreciation is sufficient to absorb tax liabilities for a foreseeable 5 to 7 years, so no tax liability is expected in that period.
Are refinancing loans from banks or NBFCs, and what is the rate differential being offered?
Business is coming from both banks and NBFCs and also bilateral foreign loans where rupee depreciation and high dollar rates have made existing costs very heavy for railway ecosystem entities. The rate differential is minimum 100 bps, at times 150 bps. Even after providing relief of 150 bps, IRFC earns far more than it used to from Indian Railways.
On the 100 bps of repo cuts seen so far, is IRFC passing them on to borrowers?
Yes, whatever savings in cheaper borrowing are obtained, they are passed on to borrowers. IRFC recently raised a 5-year bond at 6.45% or 6.5%. IRFC is not in the business of high-risk high-margin assets — it is in zero-risk attractive assets. Passing on the rate benefit is how IRFC stays competitive and wins quality business that makes good margins despite thin spreads.
What is the spread IRFC earns on a metro project, and how does that compare to peers like REC which have around 7% cost of capital and 2.5% spread?
For metro railways, IRFC aims for a cost-plus model similar to 40 bps as done with Indian Railways. Metro is a national necessity, not a standalone business, and IRFC will fund with guarantee from state and central government. Metro will yield very thin margins (30-35 bps) but provides a stable, quasi-sovereign book. On overall NIM, IRFC is not chasing 3.5% like peers — it targets about 2% but at zero risk with the lowest overhead cost of 0.1% vs 0.8-0.9% for REC/PFC and 2.5% for HUDCO.
Will overhead costs increase materially as IRFC expands into new areas?
Overhead cost is currently 0.1% and is planned to rise to only 0.15%, will not cross 0.2%. IRFC is a B2B model and does not foresee its workforce growing as large as peers. The clear advantage of 70 bps in overhead over peers will be maintained for next 2 to 3 years.
Will IRFC lend to DISCOMs?
Absolutely not. DISCOMs are in the domain of siblings PFC and REC. IRFC will fund GENCOs only if they are supplying to Indian Railways. For conventional power projects or DISCOMs with no railway linkage, IRFC is not interested. Funding mandate covers backward and forward linkages to railways — ports with railway linkage, fertilizer factories using railways for evacuation, coal mines with railway linkages, etc.
Of the INR60,000 crores sanction target, how much will be on the leasing model vs term loan model?
Mainly term loan model. Some leasing model business exists, including with NTPC for rolling stock wagons, but total leasing quantum would be around INR2,000 crores to INR2,500 crores. The NTPC leasing agreement already executed is around INR700 crores, with other deals under discussion.
Will new financing be on fixed or floating rate basis?
All sanctions to date are on a floating basis. Nobody in the ecosystem wants a fixed rate scenario currently. IRFC is open to structuring fixed rate deals if requested. Benchmarks used include AAA corporate bond rates and repo rates, determined based on credentials of the project, tenure, risk appetite of the borrower, and interest rate outlook.
Can you reiterate guidance on sanction, disbursement, and AUM for this year and next?
FY26 guidance: INR30,000 crores disbursement and INR60,000 crores sanction. Sanctioned pipeline already at INR23,000 crores at start of Q2. More than INR10,000 crores expected to be disbursed in Q2 with refinancing disbursements, making H1 nearly 50% of target. For FY27, whatever is achieved in FY26 will be the benchmark — management is confident next year will surpass FY26.
How does IRFC ensure zero NPA when lending outside Indian Railways to private and government entities?
IRFC is currently not funding anything private and has no plans to do so in the near term. The mandate follows a whole-of-government approach: central government entities, CPSEs (majority GoI-held), and state governments. Within this, lending is restricted to A-rated assets only. For metro railways, 100% guarantee is required from state and central government promoters. Private entities can be considered only when they have JV/PPA/concession agreements with the government — at that point the concession land stays with Indian Railways and tangible risk is minimized.
Does the backstop arrangement from Indian Railways still apply now that IRFC is lending to non-railway entities?
The backstop arrangement applies only for existing railway funding. Non-railway funding is done on the strength of IRFC's own robust balance sheet and net worth. IRFC is going very safely and steadily — not berserk — to maintain zero NPA on its expanded book. For next 2-3 years, the focus remains on the government ecosystem.
For entities beyond railways, is there a specific guarantee or just an understanding that the project will eventually go to railways?
It depends on the type of asset, borrower, tenure, and deal structure. Where cash flows are uncertain, ring-fencing of risks is required including government guarantees. Where external rating is strong and cash flows are predictable, government guarantees may be waived. It is decided case by case.
For the higher-spread part of the book outside metro, is the spread capped at around 90-100 bps?
Yes. Wherever risk is fully ring-fenced (like metro with cost-plus model), IRFC is happy with 40 bps margin. Where more risk sits on IRFC's book, margins are in the range of 80 to 100 bps as CMD has briefed.
How has employee count changed, and will it increase materially as IRFC enters new segments?
Employee count grew 50% but on a small base — adding approximately 20 more employees to reach about 60 total. Target is 100 to 110 employees in the next 5 years. IRFC is investing in machines, analytics, and AI rather than adding headcount. As a B2B business, overhead cost will remain at or below 0.15%.