IRFC Navigates Shifting Landscape with Profit Dip and Diversification Drive

Indian Railway Finance Corporation (IRFC) reported a slight dip in net profit for the fourth quarter ended March 2025, even as revenue saw a modest increase. The state-run financier also unveiled ambitious plans to diversify its funding avenues and client base beyond its traditional sole focus on Indian Railways. At 12:15 PM, the stock was trading at ₹127.84.

Q4 Performance Overview

For the quarter ending March 2025, IRFC's net profit slipped by 2% to ₹1,682 crore. This compares to a profit of ₹1,717 crore reported in the same quarter of the previous fiscal year. 

Despite the marginal profit decline, total income saw a rise of 3.8%, reaching ₹6,724 crore in Q4 FY25, up from ₹6,478 crore in Q4 FY24. Earnings per share (EPS) for the quarter rose to ₹1.29 from ₹1.25 in the year-ago period. Looking at the full financial year (FY25), Net profit climbed 1.4% to ₹6,502 crore for the fiscal year ended March 2025, compared to ₹6,412 crore in FY24. Revenue for FY25 rose to ₹27,152 crore from ₹26,648 crore in the previous year.

Strategic Shift and FundRaising

In a significant development, IRFC's board of directors approved raising resources of up to ₹60,000 crore for the current fiscal year (FY26). This fund-raising will be sourced from both domestic and international markets through a mix of instruments. Crucially, the company is actively pursuing diversification plans, moving beyond its historical role as the sole financier for Indian Railways. IRFC is now setting its sights on financing metro railways and rapid rail projects. 

IRFC has already engaged aggressively in these new opportunities, securing around ₹14,000 crore in assets by winning three consecutive bids over the past three months. Growth is being sought from assets with backward and forward linkages with the railways.

Improved Margins from New Avenues

Margins derived from these new bids are reportedly nearly two to three times (2x to 3x) higher than those traditionally earned from lending to the Indian Railways. While margins from Railway projects were typically around 35-40 basis points (bps), margins from the new businesses are expected to be in the range of 100-150 bps. This shift towards higher-margin assets is expected to boost IRFC's Net Interest Margin (NIM). The company is targeting a NIM of more than 2% going forward, up from the current level of around 1.4%. While the topline may not grow dramatically, the improved NIM is anticipated to lead to a steady upward trend in the bottom line.

For FY26, IRFC is targeting disbursements of around ₹30,000 crore. Due to the significantly higher margins from new business, this targeted disbursement value is considered equivalent to nearly ₹90,000 crore of traditional lending to Indian Railways. The board approved sanctions of around ₹60,000 crore for the year.

Stock Performance

Following the results and announcements, IRFC's stock saw a decline. On Monday, the stock fell as much as 1.75% to ₹126.55 apiece, and slipped 2% to ₹125.55.On Tuesday, the share price saw an uptick, currently the share is trading at ₹127.85, with slight increase of 0.50%. The firm's market capitalisation fell to ₹1.65 lakh crore on the BSE. Year-to-date, the share price has fallen 14.87%, and in the last 12 months, it has decreased by 19.71%. Despite recent declines, the stock has demonstrated significant long-term gains, zooming 298.43% in two years and rallying 465.63% in three years. 

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