IRFC — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

MR. VIVEK SINGH, DAM CAPITAL ADVISORS LIMITED MANAGEMENT

TEAM

MR. AMITABH BANERJEE-CHAIRMAN AND MANAGING DIRECTOR- INDIAN RAILWAY FINANCE CORPORATION LIMITED MS. SHELLY VERMA- DIRECTOR FINANCE- INDIAN RAILWAY FINANCE CORPORATION

Moderator · Conference Operator

Good evening, ladies and gentlemen.

I am Honeyla, moderator of Indian Railway Finance

Thank you, Sir.

The next question comes from Ralson, an Individual Investor, please go ahead.

Ralson Yeah, the question was more related to interest rates going up globally.

What I was interested in knowing is about the interest rates going up globally.

How does that impact the overall borrowing plans from the Indian Railways for its rolling stock requirements or expansion?

Amitabh Banerjee You see, as I said earlier, IRFC has been taking the cost to very diversified sources of borrowing, we borrow through the domestic bond market, the 54 EC bonds that the capital gains tax exemption bonds, and we also take recourse to domestic loans from the financial institutions, we take recourse to external commercial borrowings by way of this 144A, as well Reg S bond in the US and the European market and the Asian markets, as well as we take syndicated loans from various multilateral funding agencies.

Participants are requested to ask 2 questions in the initial round and may join the queue for more questions.

We have a question from Santosh Keshri from Keshri Wealth, please go ahead.

Santosh Keshri Yeah.

Congratulations for such a good set of numbers.

I have 2 questions.

One is about the EPS that you disclosed in the slide number 9 of the presentation.

First question is about EPS that is disclosed in slide number 9 of the presentation, where in the EPS is 5.09.

So, my question was, is this the quarterly EPS that is analyzed by multiplying it by 4 or this is trailing 12month EPS, that is my first question.

How will you arrive at this EPS?

Amitabh Banerjee I think it is the annualized one by multiplied by 4.

Correct me, if I am wrong, Sunil?

Management Team It is multiplied by 4, Sir.

Santosh Keshri Sir, then in projecting that there will not be any growth for compared to the EPS that we have in the current quarter.

Amitabh Banerjee No, not really.

No, this is just an extrapolation as far as Q1 is concerned.

So, generally, the Q1 numbers are always on the lower side as compared to the other quarterly numbers and it picks up in course of the year.

So, definitely it will move up.

Santosh Keshri So that it means that like 30% dividend that needs to be declared by a PSU as to the government norms, so we can expect to dividend of something like Rs.1.5.

Thank you, Sir.

The next question comes from Shailendra Mundra, from Veba Financials, please go ahead.

I'm so sorry to interrupt, Sir.

Can you please join the queue for more question?

I'm really sorry.

Shailendra Mundra I mean, this is, you know, it's up to the management to decide I'm trying to clarify the business model for the benefit of everybody.

I just have one tax related question.

So, because you mentioned that there is no tax, your tax liability.

So, I'm assuming that since the assets are sitting

Thank you, Sir.

Participants are requested to ask one question in the initial round and may join the queue for more question.

The next question comes from Phani Rajesekar, an Individual Investor, please go ahead.

Phani Rajesekar Good evening, Sir.

My name is Rajesekar.

I'm from Vijayawada.

My question is, whenever the offer for sale comes in the due course of 1-2 years, assume that the book value will be approximately 35 rupees.

Now the present market value where the middlemen or the broker are trying to keep the price low, except when the OFS comes, they can force the management to keep the price less than book value, but as an investor, every year, our profits are increasing the book value where I'm not getting dividends.

So how the management can assure the OFS price will not be less than the book value?

Amitabh Banerjee Okay, you go ahead.

I'm asking my team members respond please.

Management Team Basically, at present the book value is 32.64 as on 30th June 22, and as per the DIPAM guidelines because you must appreciate being NBFC, we need redeployment of our profits for further borrowings, so that my gearing ratio will be in a range.

So, that way as per the DIPAM guidelines we are required to pay dividend 30% of my PAT or 5% of net worth, whichever is more.

So, accordingly we are paying the dividends and whatever the surplus, we are redeploying in our business accordingly the book value of my per share is increasing so these redeployment is considered because of the nature of the business and to manage our gearing ratio.

Thank you, Sir.

The next question comes from Siddharth Gupta, from Voyager Capital, please go ahead.

Siddharth Gupta Good evening Sir, and good evening for entire management present.

First of all, let me congratulate all of you for this great set of numbers as usual.

The company continues to pay despite the stock price is not performing.

Before I ask my question, just one small 30 second piece of advice for all analysts and investors on the calls.

A lot of the questions that the management' answering right now have already been answered in some of the past and this call over the past few quarters about the module in much detail.

And it would be a great thing it those could be explored before the call, so that the timing of the call could be saved.

Moving on to my question.

So, in the past couple of quarters, the management has been moving towards amending its MOA and starting to lend to other ancillary railway related projects.

Has there been any progress in that term?

Because in that there was a project signed to the Haryana State Government.

But are there any other possible projects in the pipeline that are coming up?

Thank you, Sir. that will be the last question for the day.

I now like to hand over the floor to the management for closing comments.

Please go ahead Sir.

Amitabh Banerjee Dear investors, thank you very much for sparing your valuable time to confabulate with us to interact with us, and we have got very good suggestions also very good, there have been very incisive questions.

And we really thank the interest that has been evidenced by the investors in IRFC and this is your company, and we would like your company to grow, it should be a robust growth in the coming years.

And since we are dealing with Ministry of Railways and Railways has got a very ambitious CapEx plan in the coming years, so the good prospects of IRFC is closely interlinked with the growth prospects of Indian Railways.

And we see the very bright future ahead for your company IRFC.

Thank you so much.

Thank you Sir.

Ladies and gentlemen, this concludes your conference call for today.

Thank you for your participation and for using Door Sabha’s conference call service.

You may all disconnect your lines now.

Thank you and have a good day everyone.

Questions and answers

Moderator · Conference Operator

Thank you Sir.

Ladies and gentlemen, we will now begin the question-and-answer session.

If you have a question, please press * and 1 on your telephone keypad and wait for your turn to ask the question.

If you'd like to withdraw your request, you may do so by pressing * and 1 again.

Ladies and gentlemen, if you have a question, please press * and 1 on your telephone keypad.

The first question comes from Rajiv Malhotra, Skanda Investments.

Please go ahead.

Rajiv Malhotra Hi, this is an interesting set of numbers.

Thank you for the presentation.

The question is regarding the spreads charged by IRFC on rolling socket project assets, they seem to be consistently different as 0.4 and point 0.35, so is that as per an agreement with the Government of India or something?

That's my question number 1.

Amitabh Banerjee Yes, that is.

Rajiv Malhotra So, it's an agreement.

So, the question is that an agreement with the government?

Amitabh Banerjee Yeah, it’s a part, every year we enter into a standard lease agreement with Ministry of Railways, and this rate is decided upon in course of the agreement.

Rajiv Malhotra So, that means taking on from this point that every year we enter into an agreement with the Government of India that means that if there is any variation in our cost of borrowing year to year that will be taken care of by this spread, am I correct?

Amitabh Banerjee No, it's not like that.

What we do is the spread is consistent, and the weighted average cost of borrowing that would obviously differ from year to year.

The variation in the weighted average cost is not taken care of by this.

This is cost plus model, so whatever is the weighted average cost, we add 0.4% in case of rolling stock, and 0.35% in case of project added.