IRFC plans to look beyond railways

The Indian Railway Finance Corporation (IRFC), financing arm of the Indian Railways, is aiming to diversify its funding beyond Railways. Presently, 99 per cent of funds for Railways is raised by the corporation.

As IRFC expects to get listed by the end of this financial year or the first quarter of FY19, it is looking at a possibility of fund diversification.

“When you go for listing, your shareholders’ expectations also go up. There is a possibility of diversification. We may borrow from different rail entities. But, have to evaluate the risks and returns. The first thing we have to ensure is that we are not adding NPAs (nonperforming assets),” said S K Pattanayak, IRFC managing director.

IRFC operates a risk free credit model with zero NPA. This is in glaring contrast to other state-run non-banking financial companies (NBFCs) such as the Power Finance Corporation and the Rural Electrification Corporation. PFC operates with an NPA of 12 per cent and REC with an NPA in the range of four-five per cent.

The corporation has a memorandum of association (MoA) which stipulates lending only to the Railways. But, with IRFC looking beyond Railways, the agreement might see some tweaking. “Railway SPVs (special purpose vehicles) have been created for different purposes like port connectivity and coal evacuation. Most of the SPVs have shown interest in borrowing from us. This is because our borrowing cost is the lowest in the country. Our borrowing cost is 7.15 per cent with a mark-up of 50 basis points for the Railways,” he said.

Rail SPVs aside, IRFC is also open to raise funds for entities in the sector like Rail Vikas Nigam (RVNL), IRCON International, Konkan Railway, IRCON International Railtel and Railway Energy Development Corporation (REDC).

IRFC operates a risk free credit model with zero NPA. This is in glaring contrast to other state-run NBFCs