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
DIRECTOR, (ADDL CHARGE)-CHIEF EXECUTIVE · OFFICER AND DIRECTOR FINANCE – INDIAN RAILWAY
OFFICER AND DIRECTOR FINANCE – INDIAN RAILWAY
FINANCE CORPORATION LIMITED · MR. SUNIL KUMAR GOEL – GROUP GENERAL
MR. SUNIL KUMAR GOEL – GROUP GENERAL MANAGER, FINANCE AND CHIEF FINANCIAL OFFICER – INDIAN RAILWAY FINANCE CORPORATION LIMITED MR. P.K.
OJHA – GENERAL MANAGER, FINANCE – INDIAN RAILWAY FINANCE CORPORATION LIMITED
Moderator · Conference Operator
MS. ANIFA FERNANDES – DAM CAPITAL ADVISORS
LIMITED · Management
Indian Railway Finance Corporation Limited May 29, 2023
Moderator · Conference Operator
Ladies and gentlemen, good day and welcome to Indian Railway Finance Corporation Q4 FY
Thank you.
Next question comes from the line of Yogesh Soya from Sukhiya.
Please go ahead.
Yogesh Soya
Hello.
Shelly Verma
Yes, Yogesh.
Yogesh Soya
One minute.
Can you hear me?
Can you speak in Hindi?
Shelly Verma
Yes, please.
Please speak in Hindi.
Yogesh Soya
My answer is that since the listing has been done, there has been no major change in the share price.
So the company is doing well, EPS is also good, and is giving dividends.
So why is there Indian Railway Finance Corporation Limited May 29, 2023 no change in the price?
Like in the RVNL, it was given in INR 18, and now it has gone up to INR 145.
So now it is between INR 25, INR 30.
So when will there be a change in the price?
Shelly Verma
See, the moment has come for a good price in October.
It is a good moment since the last five months.
Yogesh Soya
See, the government gave it in INR 26 and RVNL gave in INR 18.
The INR 18 one has gone up five, six, seven times, but the INR 26 one is not going up till INR100.
Shelly Verma
See, what we can say is that the share price is a function of various market forces.
Yogesh Soya
No, no, tell in Hindi.
I don't understand English.
Shelly Verma
See, what we can say is that the share price in the market has many reasons for increasing and decreasing.
From our side, from the company's side, we can say that our business model is very safe and secure.
Every year we are declaring a dividend of 30% of our profit, for our investors.
Yogesh Soya
I am giving you one more example.
Titagarh Rail was INR 30 for a year.
Now it has gone up to INR350.
Our company is better than Titagarh Rail, right?
Shelly Verma
No, no.
Moderator · Conference Operator
Thank you.
Next question comes from the line of Nitin Gard from Aviva Life Insurance.
Please go ahead.
Nitin Gard
Hello, ma'am.
Thank you for taking my question.
Ma'am, can you, subjective question it is, can you throw some light on this budgetary support, how it actually works?
Because numbers are really big, but I don't see any change in this, any remarkable change in borrowing makes.
I don't see any remarkable change in the book.
So, it might be I am missing anything.
How does it work, ma'am, if you can throw some light?
How does it, what are the nitty-gritties of this budgetary support?
Shelly Verma
You are talking about this budgetary support, railways of INR 2.4 lakh Crore –?
Nitin Gard
Yes, ma'am.
How does it comes to our company, and what all areas it affects during the year, and how will it impact the borrowing of the company?
Shelly Verma
See, this budgetary support is to Indian Railways for their various capex plans.
Nitin Gard
Okay.
Shelly Verma
So, either they do the EBR through IRFC or they take the budgetary support.
So, for 2024, the budgetary support is INR 2,40,000 Crore, which as per the initial estimate meets their capex plan for the year.
But in the year, this capex plan keeps on changing, and whatever, what is the final allocation of EBR, these are all initial estimates.
So, whenever they have the requirement, they will get the budgetary support.
So, if there is a higher capex and there is a need for EBR, they will send a communication to IRFC for the borrowing.
Nitin Gard
Okay.
That means they can either straight away from their balance sheet give to the railways, or they can give authority to the IRFC to lend it to railways.
Indian Railway Finance Corporation Limited May 29, 2023
Shelly Verma
IRFC comes into picture only for the EBR, not for the budgetary support.
Nitin Gard
Yes, only for the EBR.
So, that is what my real question is.
Do we have any plan for this financial year, or any guidance from the government that that much money will be routed through EBR, through IRFC?
Because we have to chalk down our numbers for IRFC for the borrowing for the current year.
Shelly Verma
No, as I replied earlier also, this year we have not received any written communication from MoR about the target for the current year.
So, we will have to see as the year progresses, what is the capex, how much capex they finally do and how much is the support.
So, any shortfall in that, the EBR will come.
But there is no initial target given to the company for the EBR requirement.
Nitin Gard
There is no initial target.
Secondly, ma'am, your approval for 50,000 is for term loans and this capital market borrowing both.
Shelly Verma
It is for both.
Nitin Gard
It is for both.
Shelly Verma
From any source.
Nitin Gard
So, ma'am, today as we speak, currently that thing prevails.
The lower the cost, you will go for that mode of financing.
Shelly Verma
Yes.
Whenever we need funds, we explore the various sources, whichever gives us a more competitive rate, we take that borrowing.
Nitin Gard
So, ma'am, in current market scenario, I think capital markets, bond borrowing might be acting as a lower cost of capital?
Shelly Verma
YesBond market has been easing in the market.
So, accordingly, we’ll look at whenever there is a need to raise the funds.
We look at all the sources.
Nitin Gard
Because ma'am, FITD, only one issuance has come, I think, as per my knowledge.
So, that is why I am asking.
Shelly Verma
Actually, our lease rentals come in the month of April.
So, we get lease rentals in April and October.
So, we got our lease rentals.
So, now, as and when there is a requirement, we will be raising.
Nitin Gard
Okay.
Thank you, ma'am.
Thank you for accepting my question.
Thank you.
Moderator · Conference Operator
Thank you.
Next question comes from the line of Parimal Mithani from Credential Investments.
Please go ahead.
Indian Railway Finance Corporation Limited May 29, 2023
Parimal Mithani
Ma'am, thank you and congratulations for good numbers.
Ma'am, I just wanted to know, since you are funding state governments through JV, is the, what you call, the NIM margin same for them, or they are going to likely change there also, ma'am?
Shelly Verma
It will all depend upon the profile of that particular project.
So, here…
Parimal Mithani
No, since you are diverting, ma'am, from your IR, which is Central Railway funded, now you are going through the states also.
So are the NIMs capped at the same level?
Shelly Verma
No, no, no. Definitely, the margins would be different.
And we’ll fix the margins looking at the risk profile of that particular project.
But this model is totally different.
So, there, our margins will definitely be higher than this.
Parimal Mithani
Margins will be higher and there will be no cap from the central side on this funding for this, right?
Shelly Verma
The margins will be decided by our Board.
Parimal Mithani
Okay, ma'am.
Thank you, ma'am.
Thank you.
Moderator · Conference Operator
Thank you.
Next question comes from the line of Nilesh Jethani from Bank of India Mutual Funds.
Please go ahead.
Nilesh Jethani
Hi, good evening and thanks for the opportunity.
My first question was on the AUM breakup.
So, can you help me understand what’s the difference between lease receivable project assets and advances again railway infrastructure assets to be leased?
What’s the difference between these two?
Shelly Verma
Yes, I’ll explain.
See, in case of project assets, there is a moratorium period of five years during, which we make like we have supposing we have disbursed in this financial year.
So, the lease rentals will grew after five years.
So, the next five years, we’ll keep on capitalizing that amount.
So, that will lie as an advance to Indian Railways.
Once we sign the lease agreement, it will shift to lease receivable.
So, these are the advance amount is basically the amount which we have funded in the past few years, for which lease agreement is yet to be signed.
And project asset lease receivable is where the lease agreement has already been signed.
Nilesh Jethani
Got it.
So, typically if I assume a five-year moratorium period, so I wanted to understand in FY 18-19, what would be sanctioned or given out, which will reflect in AUM growth for FY 24?
Moderator · Conference Operator
Thank you.
Before we take the next question, a reminder to all the participants, please restrict yourself to two questions.
Next question comes from the line of Satinder Singh from Eon Infotech Ltd. Please go ahead.
Satinder Singh
Ma'am, thank you for the follow-up.
So, the government owns 86%, so as a listed company we have to bring it down to 75%, and I don't think we have much time.
So what is the update on this, ma'am?
Shelly Verma
So far we have not received any communication on this side.
But we will keep you posted, but so far we have not received any communication on this from DIPAM.
Satinder Singh
Okay.
So we enjoy a tax-free status, because of the leased depreciation, which has accumulated with us.
So what is this amount as of 31st of March, and what is the period over, which this will run down in business as usual mode?
Shelly Verma
See, unabsorbed depreciation as of date is about, I think around INR 4,000 crores.
And so based on our this thing, we don't see any tax.
Basically, we have become nil tax because of the adoption of Section 115BAA, we are exempt from the minimum alternate tax and we have been taking recourse to using this depreciation.
So if we analyze our numbers for the next few years, we don't see any tax liability arising as we already have this unabsorbed and every year as we keep on signing the lease agreement, we are getting the depreciation on the asset.
So for the next few years, we don't see any tax liability arising.
Satinder Singh
Right.
Ma'am you said that the weighted average tenure for assets is about eight to nine years.
When we look at AUM breakup, almost 50% and 46% of our assets are still advanced.
So it means they are still in the morat period.
And our understanding is that after morat, 15 years for the borrower to pay up.
So if 46% has more than 15 years still to go, then our average should be more than eight to nine years, no?
Moderator · Conference Operator
Thank you.
Next question comes from the line of Kartik Gada from Multiple Wealth Management.
Please go ahead.
Shelly Verma
We'll be able to take about, I think, one or two questions more.
We can take two questions more now.
Kartik Gada
Thank you for the opportunity again, ma'am.
So somewhat of a subjective question.
I don't know what would be the, I mean, how you'll be able to answer.
What could be the reason for Ministry of Railways to not resort to EBR?
And what I'm trying to understand is, has the Indian Railway become self-sustaining in terms of funding its own capex?
Shelly Verma
No, no. The reason is basically a very high gross budgetary support.
So this is, this 23-24, the support is to the level of INR 2.4 lakh crores, which is unprecedented and extremely high.
So that is the reason for not taking, giving us initial guidance on the EBR.
So the reason is only the heavy budgetary support.
Kartik Gada
Okay, okay.
But okay.
Because what I was thinking is from MoR's point of view, apart from this budgetary support, to take funding from you is the best thing, right?
Because there is no loading of tax, there is no loading of credit costs.
The opex is very, very miniscule.
So the Indian Railway Finance Corporation Limited May 29, 2023 competitiveness of the yields, which you would be charging, nobody would be able to match, right?
Not even the best of the banks.
Shelly Verma
No, no. You're absolutely right.
The reason is not due to any cost thing.
It is only due to the support they have got in this financial year.
Kartik Gada
Right.
Okay.
Thank you.
Shelly Verma
We can take the last question now, please.
Moderator · Conference Operator
Thank you.
Next question comes from the line of Pawan Tarodia, an Individual Investor.
Please go ahead.
Pawan Tarodia
Hi.
So if I see the other financial companies like PFC and REC, they have increased profit in this quarter, but your profit is decreased.
So you mentioned there is one-time adjustment in this quarter that is the reason.
So should we assume that it will not be there from next quarter, correct?
Moderator · Conference Operator
Thank you.
Ladies and gentlemen, that was the last question for today.
We have reached the end of question-and-answer session.
I would now like to hand the conference over to the management for closing comments.
Shelly Verma
I just want to thank all the investors and analyst who have participated in this call.
And I hope we were able to answer their questions.
So still if there are any queries, information they need from us, they can separately mail to our investors cell, and they can reach out to us.
We will be Indian Railway Finance Corporation Limited May 29, 2023 more than happy to share whatever information is required from your side.
Thank you so much.
Have a good day.
Moderator · Conference Operator
Thank you.
On behalf of IRFC, that concludes this conference.
Thank you for joining us.
You may now disconnect your lines.
Questions and answers
15:00:54 +05'30' · Research Analyst
“Indian Railway Finance Corporation Limited Q4 FY23 and Year Ended 31st March 2023 Results Earning Call” May 29, 2023
Moderator · Conference Operator
Thank you.
We will now begin the question-and-answer-session.
The first question comes on the line of Santosh Keshri from Keshri Wealth.
Please go ahead.
Santosh Keshri
Hello.
Thank you for taking my question.
Congratulations, ma'am, on taking charge of CMD.
Shelly Verma
Thank you.
Santosh Keshri
So I had one question regarding the disbursement.
We can see that the disbursement is going down from INR 103,000 crores to INR 60,000 crores now in this year, INR 32,000 crores.
And on the contrary, the capital planning of the Indian railways as well as the projects are like, unlike any other year.
They are doing all across.
What is the reason that our disbursements are going down and we are not able to keep pace even with our past year's performance?
That's my first question.
Shelly Verma
As I mentioned in my opening remarks, the budgetary support for Indian railways is going up year-after-year.
And this year, for FY23-24, the cross budgetary support, GBS support is of the level of INR 2.4 lakh crores all-time high.
In the previous year also, there is a very high support of about INR 1.59 lakh crores.
So this is the reason for a lesser EBR as compared to although the capex is going up year-after-year, but at the same time, budgetary support is also increasing.
So that's the reason for the lesser EBR and lesser borrowing from IRFC.
Santosh Keshri
So what is the plan for the next year, Madam?
Are you getting any guidance that it will remain at the level at which it is in FY 23 or it's going to have some better growth?
Shelly Verma
See, as far as EBR is concerned, it will all depends upon what kind of a capex will be planned for the next year and what budgetary support they will get.
So as far as our understanding, this is one of the years and EBR may continue in the next year, but at the same time, it's very difficult to comment at this stage because the final numbers will depend upon the capex plan for the next year and how much of budgetary support they receive from the government.
But at the same time, we are very actively looking at projects which are within our mandate of backward and forward linkage.
So we are trying to create and reduce our business concentration rate and try to create an alternative vertical of other projects.
Santosh Keshri
Yes, ma’am, so even in the earlier calls, it is to be said that we are not looking at only Indian railways as business and partners.
We are also looking at, as you were saying just now, for backward and forward integration, and even private players interested in railway projects will be considered for financing.
So where do we stand on that?
And may I ask that what is the percentage that's given to the private players engaged in the railway projects of the total AUM that we have now, or maybe the total disbursement that we had in FY 22-23?
Indian Railway Finance Corporation Limited May 29, 2023
Shelly Verma
In FY 23, our disbursement is to the Indian railways only.
See, we have been, for years, we have been funding only to Indian railways through the leasing model.
Now, for lending to other commercial projects, other projects outside the Indian railways, we need to set up a lot of framework and we need to have some strategic tie-up.
And we have to onboard certain agencies for doing the various approvals.
And we have to create an entire lending framework.
So we have done that.
We had hired an independent agency to create a lending framework for us, which is approved by the board.
So we are right now in the process of setting up all this infrastructure for funding.
So this alternate vertical will take some initial time for setting up and then we will go ahead with the final sanction and disbursement of the project.
So at the moment, we have sanctioned, given in principle sanction to one Haryana Orbital project.
And in this board meeting, as I mentioned, we have given in principle sanction to NTPC for leasing of rolling stock.
But we are in advanced discussion with various agencies.
We might do some consortium funding also.
So this process will take some time to structure.
Santosh Keshri
Okay.
Thank you so much, ma’am.
Just one last question.
So what could be the total amount that is sanctioned to this Haryana project and NTPC project?
Shelly Verma
Haryana has sanctioned INR 1500 crores and NTPC at the initial stage, we have sanctioned INR500 crores.
Santosh Keshri
Okay.
Thank you so much, ma’am.
Very useful.
Moderator · Conference Operator
Thank you.
Next question comes on the line of Kartik Gada from Multiple Wealth Management.
Please go ahead.
Kartik Gada
Thank you for the opportunity.
So a couple of questions.
First, you mentioned something which impacted the profitability for the quarter.
I couldn't understand it clearly.
Can you please explain again?
Shelly Verma
See, actually, we calculate our lease rental based on our weighted average cost of capital plus the margin.
For one of the years, the WACC calculation, there was some correction to be carried out.
Because as you know that we have, from the last year only, we have started signing all these lease agreements, the methodologies and all that have been set up now.
So there was certain correction to be carried out in the WACC, which is now approved by Ministry of Railways.
So because of that, there was a one-time adjustment in the WACC and accordingly, the revenue.
Kartik Gada
Okay.
So when I calculate the NIM with the numbers, it seems to be around 1.15%, 1.2% just for this quarter when I annualize it.
So going forward to next quarter onwards, again, the NIM would be going back to 1.4%, 1.5% trajectory?
Shelly Verma
Yes, it will be around the same.
There was certain, because of this adjustment and our low cost margin, but we are likely to maintain the same trajectory of NIM.
Indian Railway Finance Corporation Limited May 29, 2023
Kartik Gada
Okay.
That was first.
Second, as you mentioned about the budget, increasing budgetary support, so now considering that next year, there will be elections, so probably there won't be a budget initially, there will be just a presentation of the accounts.
So what's the idea?
I mean, next, when can we expect some clarity from the Ministry of Railways on increasing the budgetary support?
Can it be done outside of the budget also or we will have to wait for the next full budget to be presented?
Shelly Verma
Are you talking about the current financial year23-24?
Kartik Gada
Yes, 23-24 and even the next year because there will be elections in May 2024, so there won't be any budget presented initially.
Shelly Verma
See, 23-24, as I told you that generally whatever is the initial target during the year also the revisions keep happening.
So maybe we will get more clarity in the second half of the financial year about the requirement from Indian Railways for the current year.
But for the next year, I mean, it's too early to make any assessment about the projected capex and the budgetary support that will come from the government.
Kartik Gada
Sure, sure.
So just one request from my end, as and when or whenever there is some clarity from the government side, as you mentioned during the second half or whenever, it would be of great help for investors if it can be published on the stock exchanges.
That will be very useful.
Shelly Verma
Sure, if there is any further communication from Ministry, we will definitely keep our investors on board.
Kartik Gada
Right.
And my last question is, along with the results, the board also, there was a resolution for borrowing programme of INR 50,000 crores.
So can you help us to understand, our disbursement last year was INR 30,000 crores, INR 32,000 crores and now we are proposing for borrowing program of INR 50,000 crores.
So what is the plan or this is, or is it just simply an enabling resolution?
Shelly Verma
This is in a way enabling resolution at the beginning of the year.
But as I mentioned that we are very actively looking at projects within our charter.
So based on our internal assessment of disbursement plus, our debt servicing requirements and we are also actively looking at refinancing of certain high-cost loans.
So keeping all these things into consideration, we have kept this limit as INR 50,000 crores, which is a requirement under the Companies Act too, to the borrowing for the current.
Kartik Gada
Right.
And lastly, so maybe very early days, but as we move away or move out of only lending to Ministry of Railways and when we move to private sector, so the model in the sense today our credit cost assumptions will be very minimal.
The opex is already very minimal, but these will increase.
So can you, would it be possible for you to guide us what can we expect, what kind of increases can we expect in terms of the assumptions and the numbers?
Shelly Verma
First of all, as you said, this is obviously the initial days, but we are very strategically going for the diversification.
We are not in a hurry to disrupt the credit profile of our company as of now.
Indian Railway Finance Corporation Limited May 29, 2023 We are looking for projects, which in the sovereign space and initially with the project which are set up by the Ministry of Railways, state JV’s and the government.
And over the period when we have set up all the structures are in place, then we will go for the private sector.
So I don't think the kind of projects we are looking at will be any impact on our cost of borrowing.
Kartik Gada
Okay.
Thank you so much.
Thank you so much.
Moderator · Conference Operator
Thank you.
Next question comes from the line of Satinder Singh from Eon Infotech Limited.
Please go ahead.
Satinder Singh
Yes.
Thanks for the opportunity and mam, congratulations and best wishes.
What are the top two or three risks that you see to the business at this point in time?
Shelly Verma
Sorry, I didn't get your question.
Satinder Singh
What are the top two, three risks that you see related to business at this point in time?
Shelly Verma
See, if you see if you analyse the business, current business of IRFC, there is hardly any risk. – If you see our leasing model, all the risks are priced into general.
Satinder Singh
Yes, ma'am, my question was more from the concerns point of view.
So I understand it's what the risk free business is okay.
So I meant from the what are the concerns in terms of, let's say the growth of the business, okay?
Shelly Verma
In the growth of the business?
Satinder Singh
What are the key challenges that you see to business performing to potential?
Shelly Verma
The initial challenge is first to because we have been used to only funding the Indian Railways.
So we are not as organization geared up for commercial lending.
So we have to set up all the internal processes.
We have to scale up our manpower.
We have to set up all the procedures.
That is the initial challenge we are facing.
And we are meeting this, as I told you, we have already created our Credit policy.
Maybe in the initial part, we have to take help of certain agencies, like we had already signed an MOU with IIFCL.
So we are looking at more such collaborative arrangement, which help us, and that is the one challenge there.
And then when we go for the project but initially, we want to do the projects in which are in the, like a JVs with the state sector or government companies.
Gradually, once we have gained a sufficient experience in this line, then we'll move out to the private sector and other’s.
But it will all depend upon project to project.
But initial part is definitely setting up all the arrangements and setting up all the structures, which we are in the middle of doing.
Satinder Singh
Okay, okay, fine.
Then we have this 40 bps and 35 bps arrangement with the Ministry of Railways.
These seem to be very tight and they virtually put a lid on the ROE.
We have a 14% ROE at a time when the cost of funds is fairly high and it's not expected to go up anymore.
Once the cost of funds starts coming down, okay, then this ROE might fall further.
And the ROE of Indian Railway Finance Corporation Limited May 29, 2023 14% for NBFC will never get a very high pricing from the market, because you're typically looking at a high being 17%, 18% and so on and so forth.
So is there any option to increase this by working with the MoR, because the ROE is 14% and looking down going forward, so any option to increase this?
Are we talking to the MoR for this, any opportunity there?
Shelly Verma
See, MoR has been giving us a very consistent margin over the years.
And I think that all the risks are priced in.
We are passing on all the risks to them, whether it is currency rate, interest rate, all the like, - last year we have seen a huge interest rate hike.
And that interest rate hike we have passed on to this.
So we did request to them, but I feel that margin are more likely to remain consistently at this level.
Satinder Singh
Okay.
Conversely, ma'am, any risk of this being reduced, because earlier I believe it used to be 50 bps, then got reduced to 35 and then got brought up to 40.
Any risk of this going down?
Shelly Verma
No, no, that I don't think so.
That was long back and for the last four years we have been getting the same margin.
So I don't think there's any risk of margins going down.
But at the same time, I think they will maintain at these levels.
Satinder Singh
Thanks.
And ma'am what is the weighted average tenure of the assets that we have?
So because most of our assets are long-term, and I think that should be one of our qualifications as in the internet, we got long-term assets.
But they don't come up in the presentation.
So what's the weighted average tenure of these assets?
Shelly Verma
It's about eight to nine years.
We are generally raised for a very long period.
So if you see the current, I think average tenure would be ranging from eight to nine years.
Satinder Singh
Okay, ma'am, what is the borrowing mandate for FY 23-24 that you received as of this moment from the MoR?
Shelly Verma
For the current year, see, till last year, we used to get a mandate in writing from Ministry of Railways.
This year, we have not received any mandate.
So it will all depend upon how the capex shapes up and what is the support they get from the government, so if there is any shortfall, they’ll be taking from us, but they have not given any mandate in writing to us this year.
Satinder Singh
Okay, ma’am, and what's the average cost of borrowings that we had, ma'am, for the year ended at FY 23?
Shelly Verma
I think last year we had an average rate of 7.52%.
Satinder Singh
Sorry, ma'am?
Shelly Verma
7.52%.
Satinder Singh
7.52%, okay.
Okay, ma'am, thank you.
I have a couple of other questions.
I'll come back in between.
Thank you.
Thank you.
Indian Railway Finance Corporation Limited May 29, 2023
Moderator · Conference Operator
Thank you.
Next question comes from the line of Vikas Kasturi from Focus Capital.
Please go ahead.
Yes, hello.
Am I audible?
Shelly Verma
Yes, Vikas.
Okay.
Thank you, ma'am.
So, ma'am, I have two questions.
So my first question is, so what would be the funding that the railways would need for their National Railway Plan by 2030?
Is there some figure like that because I couldn't find that.
Shelly Verma
Just a minute.
Even I think we don't have the figure readily available.
We'll share with you separately.
All right, ma'am.
So second question is, I'm referring to slide 4 of the presentation.
And in that it says that the AUM grew by about INR 37,000 crores between last year and this year.
That is FY 22 and FY 23.
But when I look at the disbursement number, which is below, that is only INR 32,000 crores.
So what am I missing, ma'am?
I mean, the AUM growth is INR 37,000 crores, but disbursement is only INR 32,000 crores.
Shelly Verma
Yes, I'll explain that.
See, actually, AUM also covers the capitalization that we do for our disbursement for the projects, which are yet to be like, for example, lease agreement is yet to be signed.
So that capitalized amount also gets added to my AUM.
This is where you are finding a difference between disbursement and growth in AUM.
All right, okay.
Thank you, ma'am.
That's it.
Moderator · Conference Operator
Thank you.
Next question comes from the line of Bhuvnesh Garg from Investec Capital.
Please go ahead.
Bhuvnesh Garg
Yes.
Thank you for the opportunity.
Just a question on your presentation.
In slide 5 of your presentation, so you have mentioned that the spread for FY23 is yet to be finalized by next year.
So our understanding is that that spread is finalized at the beginning of every year.
I just want to understand that is there any change in methodology or procedure?
Shelly Verma
No, no, actually, every year it is like that.
We finalize the spread at the end of the financial year along with the WACC, like cost of funds that we have raised during the year.
So both WACC as well as other at the end of the financial year.
Bhuvnesh Garg
Okay.
At the end of the financial year.
Okay.
And then how is the accounting done for that financial year if you are finalizing the spread at the end of the financial year?
Then how is the income accounting for that financial year?
Shelly Verma
It is at the same level.
It is assumed at the same level of the previous year that we have, accordingly we account for it Indian Railway Finance Corporation Limited May 29, 2023
Bhuvnesh Garg
Okay, okay.
So assuming it to be the same.
Okay.
Now, in case for some reason, the spread is increased or decreased for FY 23, then would there be any restatement of FY 23 financial?