IRFC IPO - Apply or Not ?

Objects of issue – IRFC IPO

Here are the objects of the IPO issue.

1) Offer for sale (OFS) of 59.4 Crore shares: Money received under OFS would go to selling shareholders and company would not receive any proceeds.

2) Fresh issue of 178.2 Crore shares: Proceeds would be used for -

i) Augmenting equity capital base to meet its future capital requirements arising out of growth in its business.

ii) General corporate purpose

Who are the company promoters?

President of India acting through the Ministry of Railways (MoR) is the promoter of IRFC.

Company Financials

Here is the summary of the financial information of the company.

Its EPS for FY2020 is Rs 3.9 and last 3 years average EPS is Rs 3.62.

What are the key strengths of IRFC Limited?

Every investor should understand the company’s key strengths so that one can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the company.

1) Strategic role in financing growth of Indian Railways

2) Competitive cost of borrowings based on strong credit ratings in India and diversified sources of funding

3) Consistent financial performance and cost plus model

4) Low risk business model

5) Strong asset-liability management

6) Experienced senior management and committed team

Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.

1) Diversification of borrowing portfolio

2) Broaden its financing portfolio

3) Continued focus on asset-liability management

4) Provide advisory and consultancy services and venture into syndication activities

Here are a few reasons to invest.

1) IRFC is the only public sector NBFC company that has come to public now.

2) It has generated strong revenue growth in the last 4 years (CAGR 20%).

3) Its margins have improved in the last 4 years (CAGR 58%). It was generating 11.5% margins in FY2017 Vs 26.5% in FY2021.

4) There are several high speed rail corridor projects that are estimated to come in the next couple of years. There is huge financing required for such projects. This would provide good opportunities for IRFC.