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Informist, Friday, May 15, 2026

By Aaryan Khanna and Shweta

NEW DELHI – Indian Railway Finance Corp. Ltd. expects to expand its net interest margin to 1.65% on total assets in financial year 2026-27 (Apr-Mar) from 1.50% on an annualised basis in FY26, the management told analysts in a conference call Friday after the company's Jan-Mar results Thursday. The lender is targetting higher margin new businesses to make up 40% of the total loan book, from 5% at end-March, the management said without setting a timeline for achieving the goal.

The company is getting a margin of 220-250 basis points on lending to non-railways businesses. It plans to channel more sanctions and disbursements in this vertical against the INR-200-billion run rate of loan repayments from the Ministry of Railways per year, the management said. The share of the railways ministry in its assets under management has shrunk to 92.56% at end-March from 98.88% a year ago.

IRFC plans to take its assets under management to INR 5 trillion by September and maintain it steady from there onwards, after growing its loan book by 5.3% on year in FY26 to INR 4.85 trillion as of Mar. 31. It is also aiming for double-digit growth in its top line and bottom line, the management said. In the March quarter, the lender reported a net profit of INR 16.84 billion for the March quarter, up just 0.15% on year. Revenue from operations was up 9% at INR 73.36 billion.

"How much it will be growing, that is a different issue but the better thing is that we will be replacing the lower margin business of Indian Railways with the higher margin business of diversification," Chairman and Managing Director Manoj Kumar Dubey said. This would have a positive impact on net profit and revenues even if the pace of assets under management growth is sluggish, the top executive told analysts.

IRFC has exclusive rights to finance projects from the Ministry of Railways and has an additional mandate to lend to industries with forward- or backward-linkages to the railways, making its customer-base virtually every company in the industrial sector, the management said. In this pursuit, it is also planning to become the only large domestic player financing metro rail routes as early as the June quarter and was in talks with one state for a metro rail project, Dubey said. The company had also refinanced an INR-100-billion World Bank loan to the high-speed rail project in Gujarat, he said. 

The infrastructure lender sees its loan sanctions topping INR 750 billion in the current financial year. In FY26, IRFC sanctioned projects worth INR 729.49 billion and disbursed approximately INR 350.67 billion, exceeding its annual guidance. At the same time, it is cherry-picking assets to ensure that it maintains its record of zero non-performing assets and is lending only to large, marquee central and state public-sector enterprises, the management said. This was not only a matter of pride but a business proposition for the company.

The sterling asset quality allowed the lender to keep its borrowing costs extremely low. The management said it was aiming for a cost of borrowing lower than the yield on government securities for the second straight year in FY27. Even when competing with banks and non-banking finance companies for high quality assets, IRFC won nearly 60% of those bids and was earning a margin of 100-120 bps, the management said.

"...it (zero NPAs) attracts my investors also because everybody likes to have a company in their kitty who are having the best class assets," Dubey said. "So we are not participating into high-risk, high-reward assets."

IRFC was also looking at further sources of offshore borrowing at cheaper rates to keep its cost of borrowing in check. The yen was the preferred mode of raising external commercial borrowing, Dubey said, as the Secured Overnight Financing Rate for the dollar was still high. The state-owned entity had raised lending rates recently to maintain margins and grow profits in recent months, in line with competitors, another company executive said.

Meanwhile, the company is likely to remain tax-free for the next five to seven years, according to the MD. This is based on the lease financing of railways assets that the company already has and will increase if IRFC gets awarded subsequent contracts on lease financing of raw materials, the management said. 

At 1351 IST, shares of the company were down 0.9% at INR 99.25 on the National Stock Exchange. After the earnings declared during market hours on Thursday, the company's shares had fallen 1.3%. End

Edited by Akul Nishant Akhoury

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