Indian Railway Finance Corporation is the dedicated market borrowing arm of the Indian Railways under the Ministry of Railways. The company finances acquiring rolling stock assets and providing funds for building infrastructure for railways.The primary objective of IRFC is to meet the ‘Extra Budgetary Resources’ of the Indian Railways through market borrowings at the most competitive rates.
It also lends money to other entities in the railway sector, including Rail Vikas Nigam Limited, Konkan Railway Corporation Limited, IRCON, Railtel etc. Despite being a non-banking finance company, it is unique owing to its zero non-performing assets or bad Loans in its books, meaning all Loans are repaid entirely.
It holds a clean and profitable companyrecord since its debut on the bourses in the early months of 2021. The stock has bled shareholder wealth. As of June 2022, the stock is down by 20%. This may be a mouth-watering opportunity for many as the IRFC share is trading at a discount. An analysis of the company’s strengths, weaknesses, opportunities, and threats shows excellent strong points, but you also need to pay attention to some disadvantages.
SWOT Analysis
ICICIdirecthas found the following strong points for IRFC. The strengths of the company outweigh the weaknesses:
- High revenue and profit growth with immense returns on capital deployed and a low price-to-earningsratio
- The company has been effectively using shareholders’ funds as return on Equityhas improved in the last two years
- Revenue has been increasing every quarter for the past four quarters
- Annual net profit has been improving over the previous two years
- Book Value per IRFC share price is also improving overthe last two years
- Zero promoter pledge
- Foreign investors have been increasing their shareholding in the company
At the same time, the broker tables the following weaknesses that warrant attention. Though some depend on short-term trends:
- Mutual Funds have decreased their shareholding in the last quarter
- Cash flow from operations has been declining for the last two years, meaning cash generation has been poor from the core business
- The stock is trading near a 52-week low
- Price momentum is also weak as it is below short-, medium- and long-term averages
The broker analysis says opportunities lie in the company’s profit-making with high RoCE, decrease in provisions and a PE of less than 5.At the same time, a solitary threat is present as an increasing trend in non-core income.
