As per management, there is one-off adjustment that has been made to WACC Which was calculated higher in past. This adjustment was included in the revenue of Q4 results. This leads to the reduction in revenue
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This proposal of 5.25 lakh crore capex plan for railways is apart from the railway budgetary allocation of Rs 2.6 lakh crore for 2023-24.
(1) Is this narrative the reason market is giving a thumbs up to all railway stocks including IRFC??
well, this may be partially true. But there may be other reasons too, i guess !
(2) Business is monopoly in nature ,enough cash generating machines
(3) A year back , these stocks were languishing at very low level at very low p/e ratio …even now 8-10 P/E ratio is not very high to lose money when compared with high P/E Market in general. And most PSU companies have clean balance sheet-! Mr market seems to have realised this
(4) The Govt has realised that the only way to get rural vote is to generate employment opportunity for the rural mass which could be through huge capex, Make in India theme such as defence etc which in turn would also propel economic growth - Govt in turn also get revenues out of dividend and divestment in these PSU through OFS (once stock price goes up) .win- win situation for the govt and the country in general
(5) As regards to IRFC , the business is unique in nature.
Indian Railway Finance Corp borrows funds from the financial markets to finance the acquisition/creation of assets which are then leased out to the Indian Railways to mainly RVNL IRCON or any other entity under the Ministry of Railways. These are long term lease of 30-40 years and at the end of the lease period , the railways buys our the asset at written down value. Railway is not likely to default on interest payment.
Last week, state-owned RITES inked a memorandum of understanding (MoU) with IRFC to explore avenues of mutual collaboration in the railway eco-system and the transport infrastructure sector.
As part of the MoU, RITES will offer consultancy & advisory services and assist in ascertaining the financial & technical viability of projects, while IRFC will provide financial services to projects/ institutions that have got backward and or forward linkages with the Railways.
Discl: IRFC forms a part of my basket of Railway stocks created a year back for long term horizon of 3-5 years
… It is not buy or sell recommendation. Please do your own assessment before investing.
PSU stocks carry risk of frequent change govt policy. If there is a change in Govt , the entire capex story may not continue.
PSU stocks quarterly performance may or may not be consistent "qoq"or even “yoy”
8 Likes
IRFC 28% rise within 2 days
It may not be advisable to board a running train at this high speed.
In spite of the fact that the Govt has already declared its intention of divesting 11% through an OFS, the share is still rising and MCap has gone up now it is more than Shri Ram finance and M & M finance and many others.
The OFS may now be executed any time as the Govt would like to avail this high stock price.
And depending upon the OFS price , we may get an opportunity for entry. Market would give an opportunity.
discl: Holding stock from lower level as a part of my railway basket . please do your own assessment before putting you money
5 Likes
IRFC reaches a new high with MCap exceeding 1, 10, 000 Crore.
It is now the 2nd highest NBFC as regards to Mcap after Bajaj Finance.
It has over taken biggies like Chola, Shriram, Muthoot , L&T finance , M& M finance ,
Poonawalla etc
It is Euphoric now - it is frothy for a NBFC like IRFC. One should exercise caution for fresh entry. one can wait for OFS.
Booked profit as it has already given me 3x returns.
Discl : It is not a buy or sell recommendation. please do your own assessment before investment
Corrections are healthy - Experts see no change in PSU fundamentals
While I booked some profit before the correction set in in some of the stocks , but in the process of adding few of them back again in decline where it still enjoys good valuation and fundamentals with revenue visibility for next 4-5 years with order book.
Discl: Not a buy or sell recommendation in any PSU stocks as it carries inherent risk of frequent govt policy changes. please apply due diligence before investment
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For those who are curious to understand fundamentally what has been driving the IRFC Stock and whether there is steam left, this Case Study by Professor Bakshi is a work of ART, just like a wow !! 
Enjoy friends
10 Likes
Can we get the relevant and current fy figures mentioned in the case study?
Yes from Screener.in
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IS this just pure price action euphoria?
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no increase in loan growth, decline in EPS growth during H1
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Future, most of the Railway Capex budget is being funded by Central Govt as par of union budget (This means hardly any growth for company- this can be seen from last few quarters)
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Valuations trading at 3x of historical averages
Experts, what is the future for IRFC?
Sitting on 3x, is it better to exit?
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All the proposed funding for Huge capex in Railways will have direct positive impact on IRFC.
So the market will sense this in the near term.
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OFS in PSU’s to meet Divestment target 2023-24- there are many possible candidates during Feb- March 2023-24 as listed in the article - IRFC could be one of them- for the Govt , it is mouth watering valuation
For the current fiscal year 2023-24, the Union Budget has scaled down the disinvestment revenue target in the revised estimates to Rs 30,000 crore from Rs 51,000 crore.
It has been a good practice on part of the Govt to release this info in advance so that small investors remain alert for trading ,/ buying /selling. i also watched in TV from DIPAM officials some of these names as possible candidates for OFS.
Discl: Exited IRFC long back with profit booking
1 Like