Indian Railway Finance Corporation Limited 'CRISIL AAA/Stable' assigned to Long-Term Borrowing Programme
Rating Action
&Total short-term bank borrowings and borrowings under the rated short-term debt programme not to exceed Rs 15000 crore at any point in time. Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. 1 crore = 10 million Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale CRISIL Ratings has assigned its 'CRISIL AAA/Stable’ rating to the Rs 50000 crore long-term borrowing programme of Indian Railway Finance Corporation Limited (IRFC). Ratings on existing debt instruments have been reaffirmed at 'CRISIL AAA/Stable/CRISIL A1+'.
CRISIL Ratings has also withdrawn its rating on Bonds of Rs 4,460.831 crore and NCDs of Rs 2,722 crore (See ‘Annexure - Details of Rating Withdrawn' for details) in line with its withdrawal policy. CRISIL has received independent verification that these instruments are fully redeemed.
The ratings reflect IRFC's strategic importance to its parent, the GoI, because of the company's status as the financing arm of the Indian Railways (IR). The ratings also factor in IRFC's strong capitalisation and asset quality and adequate resource profile. These rating strengths are partially offset by IRFC's average earnings profile.
In 2024-25, the government as part of the interim Union Budget has allocated negligible Internal and Extra Budgetary Resources (IEBR) to IRFC, indicating it will not look to borrow money to fund its capital expenditure. The government has increased the budget to Rs 2.52 lakh crore to Indian Railways for 2024-25, 5% higher when compared to 2023-24. While divestment and asset monetization are the preferred funding avenues for the government this fiscal, CRISIL Ratings believes IRFC continues to remain an integral financing vehicle of the IR. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has considered the standalone business and financial risk profiles of IRFC and has factored in support from GoI. This is given the majority ownership of IRFC by GoI, and the significant role it plays in supporting the expansion of the Indian Railways as the dedicated financing arm |
Key Rating Drivers & Detailed Description Strengths: Strategic importance to and support from GoI IRFC, IR's financing arm, functions under the Ministry of Railways (MoR) and constitutes a crucial part of India's infrastructure. Primarily, IRFC mobilises funds to meet the predominant portion of EBR requirement of the IR through market borrowings at competitive rates. However, the EBR for fiscal 2023-24 and 2024-25 (as per interim budget) has remained nil.
IRFC derives substantial business and financial support from GoI. The support is reflected in IRFC's majority ownership (86.36%) by GoI. Moreover, IRFC has a close working relationship with IR and has MoR's officials as directors on its board.
Favourable lease agreements between IRFC and IR protect the former's net interest margin, as interest and foreign exchange risks on its borrowings are transferred to IR. IRFC also plans to diversify its business profile by lending outside IR; however, this will form a small part of the total portfolio and advances will be to entities having linkages with IR. IRFC is also exploring lending for infrastructure assets having backward & forward integration with railways. However, this is still in evaluation stages, and they may explore to enter into such arrangements in a consortium with other lenders.
Strong capitalisation and asset quality Capitalisation is strong, with networth of Rs 49,179 crore as on March 31, 2024. GoI has been infusing equity capital at regular intervals (Rs 2854 crore and Rs 2500 crore infused in fiscal 2019 and fiscal 2020, respectively). Gearing stood at 8.4 times as on March 31, 2024 (9.4 times as on March 31, 2023) and may remain around 10 times on a steady state basis.
Asset quality is strong, with zero non-performing assets as on date, as IRFC mainly lends to IR, which is a sovereign entity.
Adequate resource profile Ability to raise long-term funds at competitive rates is underpinned by IRFC’s access to a diversified pool of wholesale investors, including banks, mutual funds, pension and gratuity funds, insurance companies, as well as external commercial borrowings (ECBs). As on March 31, 2024, overall borrowings stood at Rs 4,12,032 crore and comprises bonds (48%), bank loans (31%), ECB (17%) and loan from government via national small savings fund (4%)
Weakness: Average Earnings Profile Earnings profile remains average as IRFC is a funding vehicle and operates on a cost-plus based model in accordance with standard lease agreement with MoR. The lease rentals with IR are fixed at average cost of borrowings + 40/35 bps. IRFC’s interest spreads are preserved by ensuring a mark-up over its costs of borrowings. Earning profile thus remains moderate compared to other infrastructure financing companies. due to fixed spreads. However, the company benefits from low operating costs owing to wholesale nature of business and negligible credit cost on account of nil NPA.
CRISIL Ratings, therefore, believes that profitability for IRFC will remain range bound. Return on assets for fiscal 2024 stood at 1.31% (1.31% in the previous fiscal) |
Liquidity: Superior The company had cash and cash equivalent of Rs 22. 8 crore and unutilised bank lines of Rs 12,403 crore as on March 31, 2024. As on same date, the total debt servicing over next six months till September 30, 2024 is Rs 25,403 crore and expected inflows during the same period is Rs 25,806 crore
Environment, social and governance (ESG) profile CRISIL Ratings believes that IRFC Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile. The ESG profile for financial institutions entities typically factors in governance as a key differentiator. The sector has reasonable social impact because of its substantial employee and customer base, and it can play a key role in promoting financial inclusion. While the sector does not have a direct adverse environmental impact, the lending decisions may have a bearing on environment and other sustainability related factors.
IRFC has a continuous focus on strengthening various aspects of its ESG profile
IRFC Finance’s key ESG Highlights:
There is growing importance of ESG among investors and lenders. IRFC’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given the sizable share of market borrowings in its overall debt and access to both domestic and foreign capital markets. |
Outlook: Stable CRISIL Ratings believes IRFC will continue to derive business and financial support from the GoI because of its strategic role in channeling finance to IR. Support from GoI should help IRFC maintain a strong credit risk profile. |
Rating Sensitivity Factors Downward Factors:
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About the Company IRFC was set up as a dedicated funding arm of MoR, specifically to raise resources from the capital market to finance rolling stock (wagons and coaches). IRFC leases rolling stock to IR and collects lease rentals from IR in advance, at half-yearly intervals. An annual lease agreement, structured to ensure that IRFC's expenses (mainly cost of borrowing) are covered, backs this arrangement, and allows IRFC to earn adequate margin. IRFC also provide funding for railway infrastructure assets for which lease agreements are signed after moratorium period of 5 years.
For fiscal 2024, IRFC reported profit after tax (PAT) of Rs 6412 crore on total income (net of interest expenditure) of Rs 6554 crore, as against Rs 6167 crore and Rs 6316 crore, respectively, for the previous fiscal. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^Not yet issued &Equivalent INR (Rs crore) outstanding foreign currency denominated term loans as on March 31, 2024 +Exchange rate as on March 31, 2024: 1 USD = INR 83.78 -Exchange rate as on March 31, 2024: 1 JPY = INR 0.5564 $Part of long term borrowing programme for fiscal 2021 %Part of long term borrowing programme for fiscal 2022 #Part of long term borrowing programme for fiscal 2023 *Part of long term borrowing programme for fiscal 2024 @Total short-term bank borrowings and borrowings under the rated short-term debt programme not to exceed Rs 15000 crore at any point in time
Annexure - Details of Ratings Withdrawn
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
|
Facility |
Amount |
Name of Lender |
Ratings |
|
Working Capital Demand Loan |
1000 |
Bank of India |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
600 |
Central Bank of India |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
5100 |
HDFC Bank |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
1005 |
ICICI Bank |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
500 |
IDFC FIRST BANK |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
1000 |
Indusind Bank |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
2500 |
Punjab National Bank |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
800 |
RBL Bank |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
5000 |
State Bank of India |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
850 |
UNION BANK |
CRISIL AAA/Stable |
|
Working Capital Demand Loan |
900 |
YES Bank |
CRISIL AAA/Stable |
|
Term Loan |
2,000.00 |
Axis Bank |
CRISIL AAA/Stable |
|
Term Loan |
16,200.00 |
Bank of Baroda |
CRISIL AAA/Stable |
|
Term Loan |
3,900.00 |
Bank of India |
CRISIL AAA/Stable |
|
Term Loan |
11,700.00 |
Canara Bank |
CRISIL AAA/Stable |
|
Term Loan |
2,000.00 |
Central Bank of India |
CRISIL AAA/Stable |
|
Term Loan |
4,000.00 |
Deutsche Bank |
CRISIL AAA/Stable |
|
Term Loan |
28,950.00 |
HDFC Bank |
CRISIL AAA/Stable |
|
Term Loan |
10,000.00 |
ICICI Bank |
CRISIL AAA/Stable |
|
Term Loan |
3,500.00 |
IIFCL |
CRISIL AAA/Stable |
|
Term Loan |
1,250.00 |
J&K Bank |
CRISIL AAA/Stable |
|
Term Loan |
1,000.00 |
Karnataka Bank |
CRISIL AAA/Stable |
|
Term Loan |
4,000.00 |
NaBFID |
CRISIL AAA/Stable |
|
Term Loan |
10,628.55 |
Punjab National Bank |
CRISIL AAA/Stable |
|
Term Loan |
1,000.00 |
Punjab & Sind Bank |
CRISIL AAA/Stable |
|
Term Loan |
12,792.80 |
State Bank of India |
CRISIL AAA/Stable |
|
Term Loan |
600.00 |
South Indian Bank |
CRISIL AAA/Stable |
|
Term Loan |
2,000.00 |
UCO Bank |
CRISIL AAA/Stable |
|
Term Loan |
9,700.00 |
Union Bank of India |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
667.68 |
Aflac Life Insurance Japan Ltd. |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
166.92 |
Aflac Life Insurance Japan Ltd. |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
166.9244 |
Aozora APF (Ireland Limited) |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
278.20 |
Aozora APF (Ireland Limited) |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
727.09 |
Bank of China Ltd, Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
150.23 |
Bank of India, Tokyo Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
111.28 |
Bank of Taiwan, Tokyo Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
222.56 |
Bank of Taiwan, Tokyo Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
166.92 |
Chang Hwa Commercial Bank Ltd, Tokyo Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan$# |
335.12 |
Indian Overseas Bank, SNG |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
305.13 |
Kreditanstalt für Wiederaufbau (KfW IPEX-Bank) |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
615.55 |
Kreditanstalt für Wiederaufbau (KfW IPEX-Bank) |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
909.09 |
Kreditanstalt für Wiederaufbau (KfW IPEX-Bank) |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
111.28 |
Land Bank of Taiwan, Department of Business |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
510.83 |
Mizuho Bank, Ltd., Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
102.16 |
Mizuho Bank, Ltd., Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
330.4 |
Mizuho Bank, Ltd., Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
1156.41 |
Mizuho Bank, Ltd., Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
65.71 |
MUFG Bank, Ltd., Gift City Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
102.16 |
MUFG Bank, Ltd., Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
989.49 |
MUFG Bank, Ltd., Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
222.56 |
NTT TC Leasing Co. Ltd. |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
166.92 |
SBI Shinsei Bank Limited |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
769.43 |
State Bank of India, Tokyo Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan$# |
2513.4 |
State Bank of India, Bahrain |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan$# |
8042.88 |
State Bank of India, Hong Kong Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan$# |
16756 |
State Bank of India, Hong Kong Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
115.14 |
Sumitomo Mitsui Banking Corporation Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
461.66 |
Sumitomo Mitsui Banking Corporation Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
1060.6 |
Sumitomo Mitsui Banking Corporation Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
1978.99 |
Sumitomo Mitsui Banking Corporation Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
166.92 |
Sumitomo Mitsui Trust Bank, Limited Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
111.28 |
Taiwan Business Bank Ltd, Tokyo Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
166.92 |
Taiwan Cooperative Bank, Offshore Banking Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
166.92 |
The Bank of Yokohama Ltd, Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
111.28 |
The Chugoku Bank, Ltd. |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
55.64 |
The Gunma Bank Ltd. |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
111.28 |
The Hachijuni Bank, Ltd., Japan |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
55.64 |
The Hachijuni Bank, Ltd., Japan |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
27.82 |
The Hokkoku Bank, Ltd., Japan |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
111.28 |
The Hyakugo Bank, Ltd., Japan |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
55.64 |
The Joyo Bank, Ltd., Japan |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
55.64 |
The Nanto Bank, Ltd., Japan |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
278.2 |
The Norinchukin Bank, Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
556.4 |
The Norinchukin Bank, Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
278.2 |
The Norinchukin Bank, Singapore Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
44.51 |
The San-In Godo Bank Ltd, Tokyo Branch |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
55.64 |
The Shiga Bank, Ltd., Japan |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
55.64 |
The Shiga Bank, Ltd., Japan |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
27.82 |
The Shikoku Bank, Ltd. Financial Markets & International Division Tokyo Office |
CRISIL AAA/Stable |
|
Foreign Currency Term Loan*# |
83.46 |
The Shizuoka Bank, Limited, Singapore Branch |
CRISIL AAA/Stable |
^Bank Lenders are part of Borrowing program of company.
#Equivalent INR (Rs crore) outstanding foreign currency denominated term loans as on March 31, 2024
$Exchange rate as on March 31, 2024: 1 USD = INR 83.78
* Exchange rate as on March 31, 2024: 1 JPY = INR 0.5564
Criteria Details
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