On the timelines for the INR 5 lakh crores, is it like a 2030 target or in the near future only?
We have set forth is a 5-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 INR 15,000 crore each. So, INR 3 lakh crore, we wish to add through 15 entities only in the next 5 years. So, here we are having AUM at INR 4.75 lakh crore. INR 3 lakh crore we want to add in next 5-year time. Through these 20 clients, it comes out to be nearly INR 8 lakh crore. So, there will be some reimbursement from the railways also. So, that is why I am not putting a specific number. What I answered to you is that we believe that going forward, AUM of this company will be INR 5 lakh crore plus.
How does management internally benchmark the company's valuation as a sovereign entity and infrastructure NBFC or a utility-like annuity business?
Currently, we are focusing on the good quality asset, and we are following the whole of the Government of India approach. And in the near future, we are envisaging that we would be funding only to the government entities and the entities which have a strong linkage with the government. Going forward, we will intend to fund only those infra projects which have a backward and forward linkage by following the whole of the Government of India approach.
As you mentioned that 40% asset will be majorly A-rated, so I just want to understand, is it only A, AA, or AAA-rated, or we have some benchmark that we will cater majorly to AAA?
Let us not go into those details. The overall thing, as an investor, you can know that we are going for A rated. Rest, board has its own powers. They look at every asset in a different manner. And finally, everything is sanctioned by the board. And board of IRFC is very, very particular about ensuring that the asset quality should be very good.
And one request, sir. If you could just earlier, we used to have, share the investor presentation. If you could just share the same thing and also give us a sense of how your liability mix is and some of the questions that the earlier participants also asked, like cost of borrowing, some of the, what do you say, your liability mix and so on. It would be very helpful, sir.
Noted.
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?
We are the Government company. We don't decide for buyback or selling of the shares. It is the domain of Department of Ministry of Finance, DIPAM. So, they are the real owners sitting on 86% of shares. If they take a call, they will be telling the market about that.
Just wanted to have your explanation for the amount which is appearing in provision and 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 NPA in our books.
You must be aware about the RBI guidelines. From 1st October onward, whatever assets that we are entering into agreement, there has to be mandatorily some provisioning to be done. So, it is those provisions which are just simply a provision. It is not NPA. So, this is for everybody now. Otherwise, you can add this INR 50 crore into our profit, and you can safely say that our profit is INR 1,850 and nearly 13%, not 10%, year-to-year.
As regards to AUM, I got the view that this is 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 FY '27 right now?
When we started the year, we were really under hard pressed conditions because for the last nearly three years there was no disbursement to the railways, which used to be our single client. Now, you see how quantum jump is taking place in AUM. So, in one quarter itself, we jumped from INR 4.6 lakh crore to INR 4.75 lakh crore. So, if, say, three or four more assets we garner in the Q4, so you can put the numbers. I can tell you one ballpark figure that this company will be hovering AUM around INR 5 lakh crore. This morning at CNBC and other TVs also I spoke about next 5-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 3x of what we get from the railways.
Just one clarification on the 40%, the non-railway ecosystem that we are looking forward to. Are we facing any kind of competition because the other players, the PSU players in the space, basically, they are having a slower growth rate right now, and they are trying to become more competitive?
Mohit, we are here for competition. In fact, 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 an open RFP. And yes, the answer to the question is there is 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 kinds of assets which are A rated, AAA rated, obviously there is competition, but it suits us. We were working all the way for 40 bps margin. So, we are getting 100 bps margin, 120 bps margin despite the competitions. So, our NIM is going ahead.
What is the expected execution timeline for INR 17,000 crore exposure where IRFC has emerged as L1? And how much of this can realistically flow into FY '27 AUM?
It is pretty much online. 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 in the first question, that generally for a greenfield project, normally two to three years, we disburse everything in the agreement.
Is there a long-term dividend payout policy that investors can anchor to, especially given the company's stable cash flow and nil credit costs?
Dividend policy is already in place. So, if you look at our dividends in the last five years we have been very steady in giving our dividends. This year, interim dividend was quite higher than what we paid last FY, and rest be assured if the PAT is growing, so dividends should also grow. This is my understanding, but the final call is taken by the board.
Our cost of funds is the lowest in the industry, which is approximately sub 5%. And earlier, we used to make margin of 40 bps on railway projects, which is now 100 bps points on, I mean, in the diversification plan 2.0 apart from railways. But do we have some benchmark that it will be all AAA rated? Still risk of NPA remains nil in this IRFC 2.0 approach as well because the competition is pretty healthy. So, can you just throw some light why we have that benefit and what is the cost of funds as of, I mean, the recent weighted average cost of borrowing?
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 many linkages with the railways, of course, this 70 to 80 bps points benefit that we had with lower cost of overhead, that is being now divided between the customer as well as ourselves. So, nearly, I believe, 40 to 50 bps is coming out of that low overhead cost to our kitty as profit. 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. Rating, as you mentioned, we are obviously going for all A rated assets. We are cherry-picking even the GENCOs. But our capital adequacy or CRAR today also is nearly 160% against the norm of required number of nearly 25%. So, we have a lot of legroom still to go for these kind of assets.
And what is the cost of funds, weighted average cost of funds, as on date?
Cost of fund is apprx 7%. So, we can't give you the numbers, but if you look at our numbers, we raised our deep discount zero coupon bond at 6.80% for 10-year bullet payment. We raised 5-year bond sometime 6 months back at 6.5%. We raised our ECB loans in the Japanese yen at a very, very attractive rate. And even if we add a 5-year hedging cost on that, it is coming somewhere around 6.2% to 6.3%. So, if you add all together with the repo rate coming down, our RTL also is quite attractive nowadays. But overall, as you rightly mentioned and you are tracking us, that we are nearly 20 to 30 bps cheaper than anybody in the ecosystem as our peers. And overall cost is always remaining less than 7%. If you ask me the target, we are looking forward to a borrowing mix which is cheaper than the G-Sec rate.
It's all floating rate-linked, right? External benchmark or MCLR? I mean, eventually...
Not necessarily. We have got all kind of mix. bond is a fixed rate. So, if you are buying any 5-year, 10-year bond or 15-year bond, rates are fixed. 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.
But still, after adding 100 to 120 bps to this, still, our rates are still competitive as compared to competition rate, which is primarily banks.
So, that is why we are winning the bids. But we are losing few also. It is not that we are winning everything we are bidding. That is the best part. And one of the good things that we take out of participating into RFP, whatever asset we have participated, participations were as large as 7 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 as 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 asset.
In your answer to the previous participant, you said we don't win all the bids. Some of the bids, we don't win. So, what is the reason for us to not win, given that we would be among the lowest-priced competitors?
So, to add to my Director (Finance), banks today with deep cutting repo rates for a few of the assets where they don't have exposures, at times, one of the banks gets very aggressive in quoting. So, that's fair enough. So, that is why we are very open to talk about it, that it is not that every bid, despite having this strength of low overhead cost and low cost of earning, it is not that every bid we are winning. And that is very good about it. There are more than 10 banks that are participating. So, one of the banks at one time, they become very aggressive for one of the assets, and they are winning it. But yes, our strike rate is more than 60% in whatever bids we have participated.
There has been a dip in NIM and a substantial increase in the lease income. Any particular reason for that?
Did you find dip in NIM vis-à-vis last quarter or general corresponding year to year? NoThis disbursement of a larger amount took place right at the fag-end of Q3. But if you compare with last year, NIM of Q3, that was 1.4, and we have landed at 1.51. So, just here and there in a quarter-to-quarter, you may not have the right comparison. But going forward, last year in total FY, we clocked around 1.4, but this year we will be clocking more than 1.5. So, that dip is mainly because of the fact that disbursement took place only in the fag-end of Q3.
How about the quantum jump in the lease income? Quarter-to-quarter again.
Basically, the lease income operates based on the lease agreement what we entered with the Ministry of Railways. So, in last year, we didn't execute 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 is why there is a minor dip in the lease income in the current period as compared to the previous period.