← Throughline · holding view Deep analysis ↗ Q4 FY26
IRFC Indian Railway Finance Corporation · Other Q4 FY26 · concall
Pattern: roa differential between new

IRFC pivoted from single-client railway NBFC to government-ecosystem lender: Q1FY26 NIM jumped 1.31 to 1.51 as diversification fired.

2 weak · 12 clean — pushback across 2 of 14 Q&A turns

Focused evidence 2 of 14

Nilesh Jethani · BOI Mutual Fundsweak

Adjusting for tax benefits and provisioning requirements, what will ROA be for the new vs old business?

New business is currently ~5% of total AUM of INR4.85 lakh crores. ROA has come from 1.34% to 1.39%. Management target is 60-40 mix (60% railways cost-plus, 40% diversified). The company will remain tax-free for next 5 to 7 years due to accumulated depreciation from leasing. The analyst's calculation of ~2% ROA for the new business based on 2.25-2.5% NIM, 0.25% operating cost, 0.5% provisioning with no tax is reasonable but management cannot officially validate the numbers.

Mohit Jain · Tara Capital Partnersweak

Any guidance on AUM growth number — INR5 lakh crore target sounds too conservative at only 3%?

The guidance is to grow every indicator — top line, bottom line, EPS, NIM — by double digit. Without AUM growth, none of that is possible. The team target is simple: grow every indicator by 10% and they will internally calculate the required AUM. No specific AUM growth number is given.

▸ Other Q&A (12)
Nilesh Jethani · BOI Mutual Funds

What are the sanction numbers at end of FY26 and what does the pipeline look like going ahead? Also what can be expected disbursements for FY27?

We started with zero pipeline or a very small pipeline of INR3,500 crores. This year, we sanctioned nearly INR74,000 crores of assets in FY26 and disbursement stands at nearly INR35,000 crores. Key deals include DFCCIL World Bank refinancing of ~INR10,000 crores and HURL refinancing of ~INR12,000 crores. Going ahead in FY27, sanctions should be more than INR75,000 crores and the INR35,000 crore disbursement mark will again be breached. Margins on new business are over 100 bps versus the 35-40 bps from railways, making INR35,000 crores equivalent to nearly INR1 lakh crores in yield terms.

Nilesh Jethani · BOI Mutual Funds

On incremental NIM — what rates are being offered versus competition in the new business?

We are always looking for the best class of assets. For highly-rated A, A+, AA, AAA assets, margins are in tune of 100 bps to 120 bps. We compete with NBFCs and banks and are winning more than 60% of bids. Despite competition in a crowded space, our zero NPA helps attract cheaper borrowing and we can offer better rates while maintaining NIM.

Mohit Jain · Tara Capital Partners

Our MoA is to disburse to railways and its ecosystem. How is the fertilizer sector disbursement correlated to the core sector?

Under our mandate, anything with backward or forward linkage to railways can be funded. Fertilizer companies have railway sidings and use railways for evacuation of finished goods and raw materials. HURL (promoted by NTPC, IOCL, Coal India) and the Talcher project (promoted by GAIL and Coal India) both qualify. This is the sweet spot — backward and forward linkages mean almost all infrastructure qualifies.

Mohit Jain · Tara Capital Partners

Targeting 60-40 mix in 3-4 years, even with 5% AUM growth, would need almost INR1 lakh crores disbursement per year. Is that possible?

Railways repay around INR20,000 crores per year, so net disbursement requirement is ~INR40,000 crores as the base. The company aspires to 30-40% non-railway mix. With competitive rates, zero NPA status, and low overheads, business is coming to IRFC without needing to market itself. There is already an NTPC-UP government RFP of INR28,000-29,000 crores in the public domain where IRFC could pick up ~INR16,000-17,000 crores based on single-entity exposure limits.

Mohit Jain · Tara Capital Partners

What repayment rate from existing railway contracts and how should we look at AUM growth for the next couple of years?

Repayments from railways are around INR20,000 crores per year going forward. The target is to cross INR5 lakh crores in FY27 and maintain it steady. The key message is that even with steady AUM, replacing lower-margin railway business with higher-margin diversification will grow NIM, PAT, and EPS. The internal team target is to grow every indicator by 10%.

Mohit Jain · Tara Capital Partners

What is the NIM differential between new and old business and where do you expect NIM to be in FY27?

Old railways margins were 40 bps; new business targets 100-120 bps. NIM moved from 1.42% to 1.50% for FY26, nearly 6% up. Target for FY27 is NIM growth of minimum 10%, landing at about 1.65% by year-end.

Mohit Jain · Tara Capital Partners

Clarification — tax-free status applies equally to non-railway business?

Yes. The company will remain tax-free for next 5 years based on already accumulated depreciation. Additionally, IRFC will be getting more leasing business not just from Indian Railways but also for metros and rapid rail. PBT and PAT will remain the same for a considerable period.

Sucrit D Patil · Eyesight Fintrade Private Limited

How is IRFC preparing to capture future opportunities in railway infrastructure financing given challenges of rising capital requirements, interest rate volatility, and regulatory oversight?

In the last 1.5 years major milestones have been covered and in last 1 year sanctions crossed INR74,000 crores. Good inquiries are coming from power, thermal, railway (new corridors requiring INR2.5 lakh crores, 7 high-speed rail requiring INR16 lakh crores), renewable, road, and port sectors. Net worth stands at INR56,000 crores with only INR35,000 crores disbursed so exposure norms are fully open — a good cushion for future growth. Lending rates are aligned with market and revised based on market conditions.

Sucrit D Patil · Eyesight Fintrade Private Limited

How will IRFC's funding strategy evolve — liquidity, diversification of funding sources, and capital structure alignment?

IRFC remains sole financing arm for Ministry of Railways and will fund any extra budgetary requirements. For high-speed rail corridors (7 announced) and DFC (Dankuni to Surat), IRFC has first right. ECB loans are being done back-to-back — $300M, $400M, and a $1.1B bid now open, all in yen. Road shows conducted in Japan, Singapore, Taiwan, and Hong Kong. ECB contribution target is 30-35% of total kitty. 54EC long-term capital gain bond market share reached 28% last year and targets higher this year at 5.25% coupon. Zero coupon bond was successfully done, first in the country. Overall borrowing cost target is below G-Sec rate.

Naman Kumar · Individual Investor

PAT dropped from INR1,800 crores in Q3 to INR1,684 crores in Q4, and OCI also declined — can you explain?

Total revenue declined due to lower other income — Q3 had a tax refund with interest that is absent in Q4. Additional CSR provisions were made in Q4. The OCI movement is mark-to-market on hedged foreign currency borrowings for non-MoR business; these are temporary postings per Ind AS 109 cash flow hedge accounting and will reverse and be reclassified through P&L when actual exchange flows occur. They will not be passed to MoR.

Naman Kumar · Individual Investor

For non-railway CPSE exposure with foreign currency borrowing, who bears the currency risk — IRFC or is it passed on?

For non-railway business, if ECB is mixed in, the risk lies with IRFC and it is immediately hedged. Hedging limits are conservative in both yen and dollar. Cost including hedging for ECB raised for non-railway consumption is below 6%, which is attractive. IRFC is also creating a cost-plus model for metro railways where risk will be passed on to them. So two models exist: cost-plus and open-RFP with risk borne by IRFC.

Naman Kumar · Individual Investor

What safeguards exist to maintain zero NPA status now that IRFC has exposure beyond Ministry of Railways?

Clients are cherry-picked from Navratna and Maharatna CPSEs — NTPC, GAIL, Coal India, IOCL, DFCCIL, CONCOR, RVNL SPVs. For state governments, only GenCos and TransCos are targeted; DISCOMs are completely avoided. States chosen include MAHAGENCO, Chhattisgarh, Haryana, and a 50-50 JV with NTPC and UP Government. All selected assets have strong balance sheets, PPA arrangements in place, and cost-plus models. Zero NPA is a business proposition — it keeps borrowing costs the lowest, not just a status symbol.

▸ Prepared remarks (5 blocks)
It's a very auspicious and happy day for us. We started on our new journey of diversification on 1st April, 2025, which we typically call IRFC 2.0. We had been conferred Navratna status. And at the same time, we had promised to the investors and our shareholders that we are embarking on a new journey of diversification, which is going to take company on a different trajectory of growth. Every quarter, we promised something and delivered, and I'm very happy to share today that we closed our financial year with strong numbers which are published and with all of you. I'm very happy to share that we promised with a guidance that would be sanctioning more than INR<strong>60,000 crore</strong>s of assets, and we'll be disbursing nearly INR30,000 crores over the year. So when we started FY26, there was zero pipeline. The challenge of the team of IRFC was to create a pipeline as well as disburse it. So typically, against what we gave the guidance of INR60,000 crores, we crossed the mark or we reached the mark of nearly INR74,000 crores for the year in terms of sanction of assets. And against the guidance of INR30,000 crores for disbursement, we could do around INR35,000 crores. That is heartening that as a management, what we spoke, what we promised, what we gave as a guidance, we could surpass that. Now when we are embarking on next FY of this new Journey 2.0, we are obviously a little relaxed in a manner that we are confident that what we propose to do for the growth of the company, we are more confident to it. We are not relaxed for the fact that growth will come on its own. We have to work for that. Numbers, as you see, overall number for the year, all the parameters have shown its highest in the history of the company, be it the revenue, it is highest for the company in all the years together. PAT, again, it is highest. We have crossed the magic figure of PAT of INR7,000 crores this year. Our net worth is consistently growing from INR52,000-odd crores, now it is INR56,000-odd crores plus. The biggest indicator is the net interest margin. And we feel that we are at the sweet spot for the fact that all these years, we worked on a flat NIM because the margins from Indian Railways was fixed. This is the first year for IRFC when it tasted the success of getting higher margins despite chasing the best quality assets through RFPs and competition. Despite the fact that we competed and won the bids, my margins are quite higher than what we used to get from the Railways. And that is having a very positive impact on my NIM. Going forward, to summarize all the indicators, that is top line, bottom line, net worth, my net interest margin, my EPS, we have given a target to ourselves that in the FY27 and going forward, we should grow in double digit.
In fact, that was a target that we gave to us for the profit last year. And end of the year, we ended up around 8%. Quarter 4 was a little flat or subdued from the fact that there were some provisions to be made because for the railway asset, there was no requirement of provisioning because it was sovereign asset. But when we are funding to even CPSEs or the state government in the ecosystem in whole of government approach, still as per RBI guidelines, provisions are to be made. There are more expenditure in CSR in the last quarter. It happens typically. So taken all together, Q4 PAT is flat, but revenue has shown the green shoots and a very high uptake of 9%, which is matching to our aspirations. Going forward our top line also in FY27 should grow handsomely, maybe touching more than 10% also, and this will start showing right from Q1. On these notes, we are not putting any numbers as a guidance for FY27. What we have decided that whatever we achieved last year, which was around INR75,000 crores of sanction on assets and nearly INR35,000 crores of disbursement, that should be the benchmark going ahead. And management is very confident that going ahead, there has to be things going positive on these lines. We'll be surpassing these numbers in this current year also. Quarter-after-quarter, it will unfold how the story is going to pick up the strength. The last comment is on assets under management, which is the key indicator for the kind of business -- sustained business that our company is doing. You see for the last 3 years, the assets under management for the company was flattish, hovering around INR4.6 lakh crores. This year, as you see on a net basis, when I talk net basis, then it takes care of all the repayment that came from the Indian Railways towards the older loans. On net basis, on the end of the year, the assets under management has grown to INR4.85 lakh crores. So going forward, we expect that in the year FY27, the magic figure of INR5 lakh crores for AUM, we should touch sometime in H1, maybe early to that, let us see. Overall, despite the geopolitical situation prevailing all over the world, we feel that the capex story of India is fully intact. The dreams of Honorable Prime Minister for Viksit Bharat is right in the place. And complementing that next 5 to 10 years perspective for Indian Railway Finance Corporation Ltd when we are targeting whole of government approach for capex financing, we are on the right track, and we'll be having consistent growth. Thank you.
Numbers, as you see, overall number for the year, all the parameters have shown its highest in the history of the company, be it the revenue, it is highest for the company in all the years together. PAT, again, it is highest. We have crossed the magic figure of PAT of INR<strong>7,000 crore</strong>s this year. Our net worth is consistently growing from INR52,000-odd crores, now it is INR56,000-odd crores plus. The biggest indicator is the net interest margin. And we feel that we are at the sweet spot for the fact that all these years, we worked on a flat NIM because the margins from Indian Railways was fixed. This is the first year for IRFC when it tasted the success of getting higher margins despite chasing the best quality assets through RFPs and competition. And end of the year, we ended up around 8%.
Quarter 4 was a little flat or subdued from the fact that there were some provisions to be made because for the railway asset, there was no requirement of provisioning because it was sovereign asset. But when we are funding to even CPSEs or the state government in the ecosystem in whole of government approach, still as per RBI guidelines, provisions are to be made. There are more expenditure in CSR in the last quarter. So taken all together, Q4 PAT is flat, but revenue has shown the green shoots and a very high uptake of 9%, which is matching to our aspirations.
Yes. If you just look total revenue portion, there is a decline in the other income also. We got a refund of income tax, and there was some interest portion in that in the quarter, Q3. Whereas in this quarter, there's no such item. And on the other side, there are some other expenses like CSR expense, for which we have made some additional provision in the current quarter. And regarding the OCI, this is whatever is there in the mark-to-market. We have, some of our borrowings in the foreign currency, which are on our balance sheet, those all things are hedged actually. And whatever movement in the market of those currencies we need to make a provision for that through OCI. So this is regarding the total comprehensive income.
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