Can someone share your knowledge in capitalising loans. Currently if I see, there are few project in projects assets side, where the lease agreements are not signed and what ever borrowing cost related to that they are reducing this from expense side and add to asset side. But in note 45 of FY22 Annual Report, its mentioned the capitalisation rate as 4.62%
IRFC is funded by equity and debt on liability side. It has rolling stock (RS) and project assets ¶ on the asset side primarily. Equity and debt has to be allocated to RS and PA. It can be done in any combination like - 50% of equity funds each. Any combination would result in same profit for the company only geography will change in the PL and BS. For simplicity IRFC has decided to allocated full equity to PA resulting in lower finance costs and % for PA. Capitalisation rate would be more or less close to the following CoB of IRFC * (PA-Equity) divided by PA.
Just came to know 100,000 in secondary lease period is not for each wagon/coaches, it is for all the assets put in use during the year. So the question of excess RoE still remains open? The company in its investor presentation reported 14.86% RoE for 21-22. However wighted avg. cost of borrowing is ~6.2% (self calculated) and leverage is 9.25 (self calculated), therefore RoE could not have been more than 6.2% + (9.25+1)*0.4% i.e. 10.3%. I am not sure how the excess 4.6% of RoE is being generated. I have read IPO document and AR of last 12-13 years, I can not find any answer. The company has been disclosing higher RoE in all of prior years ranging from 1% to 4.6%. The company has not been able to convey in its reports its one of the fundamental nature of business which is contributing the higher RoE. Does anyone of you have an answer to higher RoE?
There is a report of ambit capital on IRFC where they also viewed this business as 10-12% RoE business.
Hi… IR will pay a pre-lease (pre-disbursement interest) income in that 5 year moratorium period which was mentioned by Amitabh Banerjee. So, there is some monetization happening even in that moratorium period and atleast the lease income will not accrue in the AUM.
On September 26, The Wire had sent queries to V. K. Tripathi, the chairperson of the Railway Board, categorically asking why vigilance clearance was granted to Banerjee at the end of his one-year probation in October 2019 inspite of the fact that the CBI had named him as one of the prime accused in the Rs 144-crore corruption case at another PSU, Hindustan Paper Corporation Limited (HPCL) in March 2019.
Additionally, this correspondent had asked Tripathi through an email why Banerjee was still the authorised signatory for the PSU’s business matters – including the authority to pull out thousands of foreign currency from the Reserve Bank of India – even though there was an ongoing vigilance inquiry against him for misappropriating funds (including US dollars) as the chairman and managing director of the IRFC on as many as 30 counts.
He was also asked as to whether he would confirm that the office of the cabinet secretary refused to clear Banerjee’s official trip to Singapore in April 2022 citing the same vigilance inquiry against him, which eventually forced the PSU to send Shelly Verma and another junior official of IRFC on behalf of the PSU.
According to ministry sources privy to the pending vigilance inquiry against Banerjee, the allegations are also against Banerjee, and include “spending around $ 27,000 of as ‘entertainment allowance’ to buy expensive watches, mobile phones, laptops, gold coins, expensive shawls, etc.”
Other vigilance allegations against Banerjee include staying with his family at the IRFC guest house in Green Partk for a long period and getting the company to pay for a more expensive 10-year British visa on his personal passport despite having around a year to go in service.
News Link : The Wire Impact: Railways Divest Key PSU Head Named in CBI FIR With 'Immediate Effect'
There will be 300-400 new Vande Bharat trains announced in the Union Budget 2023-24 according to a top Railway Ministry official in the know. It is also expected that the gross budgetary support (GBS) for the national transporter is going to top the Rs 1.37 lakh crore allocation earmarked during Budget 2022-23.
This will be the highest ever allocation once announced in the next year’s Union Budget for the Indian Railways. “Among other this, this allocation will be spent in laying new li …
TAILWINDS STRONG FOR RLY CAPEX N HENCE BY DEFAULT FOR IRFC .
NO WONDER IRFC TOUCHING NEW HIGH
Some material developments may happen in IRFC in next six months. No borrowing target set for IRFC for 23-24 in budget and for 22-23 the target got revised from 66,500 crore to ~48,000 crores.
This seems strange. IRFC has almost approached 10X. For fresh borrowings it will have to either increase the leverage limit or raise equity. To me it seems like increasing the leverage limit of 10X is not going well with either regulator, lender or rating agency. There would be lot of noise in the stock in next six-nine months so fasten your seat belt for roller coaster ride.
The above will not alter the long term prospect of IRFC though.
Disc. Invested.
Budget 2023-24: Railways gets record Rs 2.6-trillion capex boost | Business Standard News.
In Budget, Lease charges payable to IRFC has been increased to 23782 for Fy23-24 against 19855 for Fy22-23 which is 20% increase. This means 20% Revenue & Profit growth YOY.
No Additional IEBR showing for IRFC is surprising as they have allocated 2.0 lac cr as part of budget support against 1.3 lac in Fy22-23… How they are generating this additional 70 thousand Cr in budget needs to be understood !!!
The trend from last 2 quarters is many of the project assets are moving from moratorium to lease receivables and this will continue in next year also. So they are not new lending. So a 20% increase in revenue will not result on 20% PAT, since interest costs are so far capitalized, now will be booked in expense
Disc: Exited recently
Has anyone read any brokerage report on IRFC ?
I am unable to find any report.
All i can see is IPO notes.
Attached is the latest rating report.
any one still tracking the stock ?
Post removal of CMD Amitabh Banerjee due to issues already discussed on thread quarterly investor earnings call have stopped so there is less clarity. Also no annual borrowing target was declared in budget as government in budgetary allocation has increased budget substantially also there is a gearing issue. Expected OFS of Government stake (86.36%) overhang is also there.
It is getting priced like old PSUs but given cost plus model offers low downside risk at CMP of approx 26 rupees. Moreover DIPAM guidelines of 30% of PAT as dividend for all PSUs (which is unfair for business but government has not given special consideration to IRFC) which gives visibility of 5 to 6% dividend to investors.
The Official communication to the Exchanges about CMD .
Hopefully, hereon, there will be more movements and communication
fb083753-2599-44e1-bac4-cca373438939.pdf (356.8 KB)
Can someone please explain why the company’s profit has declined during q4, inspite of increase in loan book.
My understanding was that the business model was cost plus margin. Is there a lag in passing on the cost or am I missing something.
Thank you for the reply. Any explanation for the decrease in profit (19% QoQ and 11% YoY).
