If you’ve been watching the markets, you might have noticed IRFC’s shares climbing steadily for four straight sessions, jumping over 11% to close at ₹123.70 on Friday. I’m going to break down what’s happening with this railway PSU and why it might be worth a spot in your portfolio.
What’s the Big News? #
The biggest catalyst for IRFC’s recent rally is simple: the Government of India just gave the company “Navratna” status. Until now, IRFC was only a “Mini-Ratna” company, but this upgrade is a big deal!
So what does this Navratna thing actually mean? It’s like getting a promotion at work with more freedom and responsibility. IRFC can now:
- Invest up to ₹1,000 crore (or 15% of its net worth) in a single project without asking the government for permission
- Form partnerships and joint ventures more easily
- Make business decisions faster without government red tape
For us investors, this means the company can grow more quickly and seize new opportunities when they come up.
IRFC’s Business: More Than Just Trains #
Most of us know IRFC as the financing arm of Indian Railways. They’ve been the money behind about 80% of Indian Railways’ rolling stock (that’s trains and wagons to you and me). But here’s what’s interesting - they’re now expanding beyond just railways.
IRFC is moving into:
- Power generation and transmission
- Mining and fuel
- Ports and warehousing
- Telecom and hospitality
They’ve already secured some big deals:
- ₹700 crore funding for 20 BOBR rakes for NTPC
- ₹3,190 crore loan for Patratu Vidyut Utpadan Nigam Limited
- ₹7,500 crore financing for NTPC Renewable Energy
This diversification is exciting because it opens up new revenue streams. The company’s CEO, Manoj Kumar Dubey, says they’re currently earning margins of about 35-40 basis points on railway loans, but they could earn 100-150 basis points (or even up to 200-250 basis points) on these new ventures. That’s potentially 5 times more profitable!
The Numbers Look Solid #
As an investor who likes to check the fundamentals, IRFC looks pretty strong:
- Revenue of over ₹26,600 crore
- Profit after tax exceeding ₹6,400 crore (as of March 31, 2024)
- Market cap of over ₹2 lakh crore
- Assets under management of ₹4.61 lakh crore
- Net worth around ₹52,000 crore
The company has shown steady growth with average revenue growth of 15% and median profit growth of 11%. Its Return on Equity (ROE) stands at a healthy 13.7%, which is pretty good for a government-backed company.
What really stands out to me is that IRFC has ZERO NPAs (non-performing assets). In the lending business, that’s like having a perfect driving record. They also have an incredibly high capital adequacy ratio (CRAR) of over 700%, which basically means they’re very, very stable.
What About the Stock Performance? #
IRFC’s stock history is interesting. It went public in January 2021 at an IPO price of ₹26. Now it’s trading around ₹123.70 - that’s a gain of about 375% in just over four years! Not too shabby.
Looking at different timeframes:
- Last 1 year: Down 18% (a bit of a rough patch)
- Last 2 years: Up a massive 317%
- Last 3 years: Up 446%
The stock has pulled back from its highs, but that might present a buying opportunity. It seems to have found strong support around ₹115.
Dividends for Income Seekers #
If you’re looking for income, IRFC has been a consistent dividend payer. The current dividend yield is about 1.27%. Since its IPO, they’ve paid dividends 8 times - twice each year. Recent payments have been around ₹0.70-₹0.80 per share.
What the Experts Are Saying #
According to market expert Sumeet Bagadia from Choice Broking, IRFC shares have crucial support at ₹115. He suggests holding with a stop loss at ₹115 for a short-term target of ₹140. New investors might consider buying at current levels with the same stop loss.
However, I did notice that according to Trendlyne data, one analyst has a “Strong Sell” recommendation with a target price of ₹50 - that would be a 58% downside. But that seems to be a minority view given the company’s growth and recent positive developments.
Risks to Watch Out For #
No investment is without risks. For IRFC, I’m keeping an eye on:
- Their cautious approach to external borrowings due to the appreciating dollar
- The fact that Indian Railways currently owes IRFC around ₹4.6 lakh crore
- Any potential policy changes that could affect their relationship with Indian Railways
My Take as a Retail Investor #
IRFC looks like a solid bet for a few reasons:
- The Navratna upgrade gives them more freedom to grow
- Their diversification beyond railways opens up more profitable business lines
- Their financials are rock-solid with zero NPAs
- The stock has found good support around ₹115
If you’re looking for a PSU stock with government backing, steady dividends, and growth potential, IRFC might be worth considering. I’m thinking of adding some to my portfolio on any dips toward the ₹115 support level.
What do you think about IRFC? Are you holding or planning to buy? Let me know in the comments!
Disclaimer: This is not financial advice. Always do your own research before investing.