Indian Railway Finance Corporation (IRFC) is the financing wing of Indian Railways, a Government of India Undertaking established on December 12, 1986. Its intended purpose is to access domestic and international funds to meet the capital requirements for the expansion and modernization of Indian Railways.
IRFC Financial Impact:
IRFC, as of the end of the year, commenced the train funding above ₹5.04 lakh crore in the rail sector. These funds were used to acquire stock assets and infrastructure, a significant part of Indian Railways’ annual investment. In particular, IRFC has funded 13,764 locomotives, 76,735 passenger coaches, and 2,65,815 freight wagons, covering about 75% of the Indian Railways’ rolling stock assets.
IRFC Investment Opportunities:
Concerning this information, IRFC presents investment facilities such as tax–free bonds under Section 54EC of the Income Tax Act, 1961. These bonds help investors get an opportunity to finance the development of Indian Railways while having an option to get tax exemptions.
It was stated that the face value of IRFC bonds would be Rs 00 per bond.
IRFC bonds are issued with a face value of ₹ 1,000 each. However, bonds can be of any denomination, such as ₹5,000/- or ₹ 10,000/-etc.
Are IRFC bonds safe investments?
Indeed, they are relatively safe and conservative investment products. Currently, the company has been assigned an ‘INTERIM’ rating of ‘AAA’ by CARE Ratings, signifying a high rating of the company’s creditworthiness.
How can I invest in IRFC bonds?
Access to IRFC bonds can be obtained from a website and banking and financial organizations. The process involves uploading essential documents relating to PAN cards, address proof, and bank details.
What are the tax benefits of investing in IRFC bonds?
IRFC bonds issued under section 54EC of the Income Tax Act provide investors an effective means for the investment of the amount liable to tax on the amount of long-term capital gains arising from the transfer of a long-term capital asset or a long-term capital gain.
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IRFC Financial Growth and Impact:
Fund Raising Capacity: Till March 2022, IRFC has mobilized over ₹ 5.04 lakh crore to fund the development and modernization of Indian Railways.
Asset Financing: The firms and organizations that have financed the Indian Railways include, as mentioned above further, IRFC has financed 75% of the value of new and second-hand rolling stocks of the Indian Railways, over 13000 locomotives, over 70000 passenger coaches out of total 66000.
Long-Term Investments: The financing models allow Indian Railways to purchase assets that meet the corporation’s standards for long-term financing, up to 30 years, both financially and operationally.
IRFC Investment Products:
- IRFC Bonds: A straight line of credit is used by financial companies like IRFC to issue public bonds for financing. These borrowings can be of any form; they can be tax-free, commercial, or green bonds. These investment products are developed for investors seeking steady profits for an extended period.
- Tax-Free Bonds: It may be noted that IRFC undertakes tax–free bond issuance under Section 10(15)(iv)(h) of the Income Tax Act, 1961. The tax-free bonds favor long-term clients since they give back their investments with interest and tax exemptions.
- Corporate Social Responsibility (CSR): More to this, IRFC plays social responsibility and sustainable causes under its corporate social responsibilities, focusing on education, health, and real estate.
Railway stock list
- Jupiter Wagons Ltd
- Titagarh Rail Systems Ltd
- Rail Vikas Nigam Ltd
- Ramkrishna Forgings Ltd
- Texmaco Rail & Engineering Ltd
- Oriental Rail Infrastructure Ltd
- BEML Ltd
- Indian Railway Catering and Tourism Corporation Ltd
- Indian Railway Finance Corp Ltd
- Railtel Corporation of India Ltd
Is IRFC a government-owned company?
IRFC is a public limited government company under the Ministry of Railways.
The investment horizon of the IRFC bonds has been kept long-term to spread out the cost of payment or redemption over a long period.
Most bonds issued by IRFC provide maturity periods of 7 to 10 years, depending on the type of bonds offered.
History and Formation of IRFC
Hence, the requirement for a specific financing body for the Indian Railways emerged in the mid 1980s as the railways struggled to advance sufficient cash for its growth and streams of the railroad market. The government of India understanding the significance of railways for the growth and development of the Indian economy formed the Indian Railway Finance Corporation in the year of 1986. The main objective of IRFC was to mobilise resources in advance so as to meet the fund requirements of the Indian Railways for its capital works.
IRFC was incorporated as a wholly owned government company of Ministry of Railways of Government of India. It was given the mandate of mobilising funds domestically as well as in the international market through the issue of bonds and other related securities. Corporation is governed by the law of the Indian Companies Act 1956, and it gets its operations regulated by SEBI and RBI.
Role and Functions of IRFC
Funding for Railway Transport for India
The primary objective of IRFC is to mobilize funds for the Indian Railways. H featured on corporate bonds which are sold on the market to help the corporation to raise capital which in turn is used to purchase rolling stock, conduct track electrification and undertake other railway undertakings. Comprehensive Information by issuing Bonds IRFC enables the Indian railways to get finanicial freedom to manage its long term investments.
Financing Rolling Stock
IRFC has played a great role to fund the acquisition of rolling stock for Indian Railways. The rolling stock is procured either through direct purchase by the corporation or through leasing means. They allow Indian Railways to keep and develop a stock of rolling inventory while avoiding taking up strategic large capital necessities on the company’s resources.
Infrastructural Development and Its Modernization
IRFC also has the responsibility of financing railway up gradation, renewals of tracks, stations, electrification of tracks and new rail lines. These are important investments to support improvement in the efficiency and safety of the railway infrastructure as well as expansion of the network. As a low-interest and long term funding partner, IRFC enables the Indian Railways to support infrastructure initiatives that may otherwise be difficult to execute due to funding constraints thus supporting the growth of the economy.
Backs Environment Preservation and Management Programs
In the last five years, IRFC has been participating in funding Indian Railways’ green elements like electrification of trains, solar and wind power, and the purchase of energy-efficient trains. Indian Railways has planned stringent measures for decreasing its emissions levels and thus, the financing role of IRFC is crucial for this process.
Impact of IRFC on the Indian Railway System
Expansion and Upgradation of Indian Railways
IRFC has been on forefront in the line of putting up modernization and expansion of Indian Railways network. With financial assistance from IRFC, the Indian Railways has been able to purchase high quality rolling stocks which include; high speed trains, wagons for transporting freight among others. This has enhanced the general quality of passengers services and freight transportation throughout the country.
Acquate working capital for better flexibility and improved financial position is the major benefit stated by the respondents.
The funds raised from the capital markets by IRFC has helped Indian Railways keep the funds stingent and avoid fully relying on government grants. The money generated by IRFC through bonds has enable the railway operating company to embark on big projects without much stress on own resources.
Boosting Economic Growth
Businesses have been diversified through the expansion of the railway network financed partly by IRFC hence leading to economic growth in India. The railways that have been established enhances the transport of good and individuals enhancing the support of industries and commercial and tourism sectors. Also it provide centrality to interconnect the regions and promote integration while at the same time lowering the costs of transport which has an overall impact on the economy.
Job Creation
Recapitalisation and growth of the Indian Railways have also resulted in direct and indirect employment in several areas of production, construction and services. The acquisition of new rolling stocks and constructions of new rail network demand a massive human resource thus offering jobs to thousands of persons.
Environmental Sustainability
IRFC can take much credit for helping to make the Indian Railways even greener than they are today. The replacement of old traditional trains by electric trains, energy saving locomotives, and the use of renewable energy have played a real helpful role in the quest of railway construes to the environmental dimensions of climate change which is a core objective of India.
Challenges Faced by IRFC
Despite its success, IRFC faces several challenges in fulfilling its mandate:
Rising Borrowing Costs
Since IRFC securitizes its funding through bond issue it has to worry about increasing cost of fund especially during inflation or credit crunch . Variable interest rates are another determinant of the cost of capital which indirectly forms the base for the sound financial planning for the funded projects in IRFC.
Debt Management
IRFC over the period of time has taken essential amount of borrowings, which has resulted the company in having quite a considerable amount of liabilities. Coordinating this debt while at the same time ensuring that funds to finance important projects are available can be a bit of a juggle. Management of debt is an important facet in the dynamics of finances in the corporation.
Project Delays
In this case, the timing of construction of railway infrastructure projects has an impact on timely repayment of the loans which have been obtained by IRFC. These delays may consist of, regulatory issues, acquisition of land, and the general hitches in structures
How can one apply for IRFC bonds or invest in them?
To invest in IRFC bonds, retail investors can:
Primary Market: Invest during the first time when IRFC floats bonds in public through offerings.
Secondary Market: Invest directly in IRFC bonds available on BSE and NSE through stock brokers or through online trading platform.
Through Banks or Financial Institutions: Other banks and financial institutions may also use IRFC bonds as part of the investment products served to the clients.
What is the future outlook for IRFC?
The favourable outlook for the upcoming IRFC forecast is pegged on the strategic role that Indian Railways plays in the country’s infrastructure plan. The active and proposed modernizations including high speed rail, electrification of tracks and formation of dedicated freight lines would need significant capital investments which IRFC shall be in a position to facilitate. Besides, IRFC has also interest on sustainable and green energy projects which are in synergy with the environment conservation agenda of the Indian government thus guaranteeing continuity of demand for its financial services.
What are the risks associated with investing in IRFC bonds?
While IRFC bonds are relatively safe due to government backing, there are still some risks involved:
Interest Rate Risk: The going-concern assumption is the most commonly used valuation method. Its owning of existing bonds may suffer in case interest rates increase and hence the value of existing bonds decrease.
Credit Risk: Even though, IRFC’s bonds offer relatively low risk, its vulnerability to a downgrade of India’s sovereign credit rating, reduces the appeal of the bonds in question.
Liquidity Risk: However, the bond may not be sold and converted to cash at the intended particular price within the market due to short-term liquidity needs.
What is the credit rating of IRFC bonds?
It may be noted that IRFC bonds are assigned credit rating by reputed credit rating agencies such as CRISIL, ICRA and CARE. Such bonds are frequently given a high rank, often between “AAA”, the highest rank possible, because they are secured by the government. Two, different market conditions and economic aspects may affect the ratings variant.
What is the current market performance of IRFC shares?
Similar to most industries, IRFC assessment is done based on factors such as the market demand for its bonds, financial returns, and Business Control Climate. The organization operates under the industry giant and floated its IPO in the beginning of 2021, it is publicly traded on the Bombay Stock Exchange (BSE), and National Stock Exchange (NSE). People buying stocks in IRFC should regularly view its statements using its stocks by closely observing its returns in specific quarter 3 and the general market conditions.