IRFC’s Stellar Rally: What’s Driving the Stock to Record Highs 2024

IRFC, or Indian Railway Finance Corporation, is a government-owned company that provides financial services to Indian Railways. Lately, IRFC shares have been doing well, reaching new highs and giving good returns to investors. Some reasons for this positive trend could be:

1. Government’s focus on railways: The government is putting a lot of money into the railways, part of its plan to develop infrastructure and boost the economy. In the Union Budget 2024, the government set aside Rs 1.1 lakh crore for the railways, the highest ever. Various projects like the National Rail Plan 2030, Dedicated Freight Corridors, High-Speed Rail Projects, and Station Redevelopment Program are expected to increase the demand for IRFC’s services, as it is the main financial supporter of the railways.
2. Capital infusion and fundraising: In December 2023, the government injected Rs 1,000 crore into IRFC, making its net worth and borrowing capacity stronger. IRFC also collected funds from different sources like bonds, loans, and commercial borrowings at competitive rates to meet its financial needs. Plans to raise Rs 8,000 crore through a qualified institutional placement (QIP) in January 2024 are expected to further boost its financial strength.
3. Strong financial performance and outlook: IRFC has shown consistent growth in revenue, profit, and assets in recent quarters. In the second quarter of 2023-24, its revenue increased by 21.4%, reaching Rs 3,788 crore, and net profit grew by 26.6% to Rs 1,482 crore. IRFC’s total assets also increased by 23.7% year-on-year, reaching Rs 3.36 lakh crore by September 30, 2023. The company’s positive outlook includes plans to expand market share, diversify its portfolio in railways, and explore opportunities in renewable energy, power, and urban transport.
4. Attractive valuation and dividend: IRFC shares are considered attractive in terms of valuation compared to others in the industry. Its price-to-earnings (PE) ratio is 8.6, lower than the industry average of 12.6, and its price-to-book (PB) ratio is 1.2, lower than the industry average of 2.2. IRFC also regularly pays a healthy dividend to its shareholders, with a dividend yield of 3.7%, higher than the industry average of 2.9%.