📢 5 STEPS TOWARDS WEALTH 🚀 The Indian Stock Market Way
IRFC: CMP: 174 | LONG TERM GR: 15% | CYEAR GR: 12% | FY_24 RESULT UPDATE
(Zero Disbursement this year due to High Budgetary allocation of 2 Lakh Cr in Railways)
Indian Railway Finance Corporation (IRFC) is an Indian public sector undertaking engaged in raising financial resources for expansion and running through capital markets and other borrowings. The Government of India owns a majority stake in the company, while the Ministry of Railways has the administrative control. It is the dedicated market borrowing arm for the Indian Railways. IRFC raises money through financial bonds and from banks and financial institutions. Primary business: 1) Financing the acquisition of rolling stock assets 2) Leasing of railway infrastructure assets and national projects of the Government of India and 3) lending to other entities under the MoR. They have Minimal credit risk as 98.73% of AUM is exposure to MoR. Hence Current GNPA is 0%. 68% of Sales come from Lease while 32% from Finance. More than 80% of the Indian Railways Freight Wagons, Coaches and Locomotives are with IRFC. Over the last three decades, have played a significant role in supporting the capacity enhancement of the Indian Railways by financing a proportion of its annual plan outlay. Their Aum 5 years back was just 1.5 Lakh Cr but the strong development plans happening in Railway helped them reach AUM of 4.7 Lakh Cr. This is a strong 25% CAGR growth. This helped them increase their income which is a combination of both interest income and Lease income from 9200 Cr during Fy_2018 to today having the income of 26000 Cr. The company announced its initial public offering on 18 January 2021 and got listed. Yes, we have recommended this company during the IPO considering strong estimated growth even in the future.
We saw AUM growth of 25% & Sales growth of 20% during the past 5 Years.
FY24 RESULTS: This Year AUM has grown by 0% due to high allocation to railway directly from budget. We may see this year AUM cross the landmark 5 Lakh Cr soon. Revenue from operations grew by low 12% this year which was somewhat lesser then what we saw during the beginning of the year. Increasing interest rates for the last 2 years made the borrowing cost high. Hence, we saw the cost increase by 15%. Hence the margin narrowed by 200 bps which made the muted profit growth of just 4%. Considering the strong capex of 10 Lakh cr to be allotted to infra where around 2.5 lakh cr is for Railways & 40000 KM of more lines to spread, Old bogies to be upgraded to Vandebharat standard the growth should be in continuity. We may see sales growth of 12% this year while profits may grow 16% this year considering cool off in interest rates during the second half. Profits might increase once the cycle of interest cut is seen.
If holding since IPO or added during any fall we were having the target of 205 since last year where 5% profit booking was to be done. Hence can book 5% profits near 205 which new buying again can be done during any fall in the whole range of 117 to 88.
Long-term sales could grow by 15%, which can take the company to landmark sales of 50000 Cr till fy_28. Can expect a multiyear rally along with high and consistent dividend earnings. Yes, a wealth creator.
DISCLOSURE: FOR EDUCATION PURPOSES, DO NOT TREAT AS A RECOMMENDATION
