Good morning, everyone, and Welcome to the earnings conference call of Indian Railway Finance Corporation Limited for the second quarter and half year ended September 2026. We are privileged to have with us today the senior management team of IRFC, represented by Shri Manoj Kumar Dubey, Chairman and Managing Director and CEO, Dr. Ranjay Choudhary, Director Finance, and Ms. Deepa Kotnis, Executive Director of Finance and Chief Financial Officer, along with other distinguished members of the senior management team. With this, I would like to invite Shri Manoj Kumar Dubey to share his remarks on the company's financial and operational performance for the quarter and half year ended September 2026, followed by the management's outlook on the business going forward. Over to you, sir.
Good morning, Puneet, and good morning friends who are attending this con call. As CEO, this is one of the heartening mornings for me. When numbers of a company are beating the guidance as well as the expectation of the streets, the job of CEO becomes easier. Today is one of the easier days for me after a lot of difficult times and difficult days to reach these numbers. As I was talking in the morning with one of the TVs, numbers are not manufactured, they are earned. IRFC, on embarking on its 2.0 journey, that is diversification journey. If you look at the last six quarters of the company, out of six, five quarters, the profit after tax has grown in double digits.
Except for the Q4 of last FY, where provisions were made for new businesses, where 1% for greenfield and 4% for brownfield provisions are to be made as per RBI norms. It's a very satisfying day talking in the con call that consistently for the last six quarters in our diversification mode, this company is growing. As I always say that when you talk about all the ratios, every ratio emanates from profit after tax. If a company is not making healthy profit, healthy growth in profit, none of the ratios will show positive trends. If I give a picture that in the last six quarters, five quarters, the company's profit after tax has grown in double digits. You can see it, the numbers that all the ratios and everything will be having a positive trend, including net interest margin.
Apart from the good numbers that is for H1, more than 20% rise in revenue and more than 10% rise in PAT, I would like to also talk about and share my other views to the shareholders at large, where in the past when we embarked on the journey of diversification, few questions were really coming to the mind of the investors that for the first time we are going on diversification apart from single client model. What is the team that we are having for appraisal? I want to inform all of you that in last one year, the number of employees in IRFC has grown almost double. You can think of the kind of manpower required that we have added. In my company, I always say the way we cherry pick the assets, we cherry pick the talent.
Every talent that we have added to our system, they are all best in class that we could get in the country. On top of it, I also want to share a very unique model that I follow as CEO here. That is a model of mentoring and mentorship. To put a record, my chief risk officer is a veteran from the NBFC business. He has been Director of Finance of REC, and after that, he is here as chief risk officer, and he is also donning the hat of mentoring all the young minds, making them very alert about the kind of compliances that is required. We have got our advisor chief. She was our Director of Finance earlier, and she comes from the stable of PFC, working there for the last 30 years. She brings all the knowledge that is required for borrowing side.
She is not only mentoring, she is giving very active advices to the company on those lines also. My chief compliance officer is a veteran from the industry coming from the PNB side. We have got our advisor, one more advisor from REC side who has retired, and they are advising us on the appraisal side. We have created the grid of mentors who are shaping, guiding the young minds who are doing the appraisal, borrowing, everything. This is something that I wanted to share and let my investors be assured that the kind of team that IRFC has created now is one of the most robust that one can think of. The other thing I wanted to share with you that with the training of the railways, we are very particular about oversight and compliances.
Whatever RBI wanted us to do, whatever CAG wanted us to do, whatever internal auditing wanted to be done. In fact, I forgot to mention you that our head of internal auditing is a veteran from government with all the experience of more than 35 years. We have put all the compliance things right in the place, and we are trying to be best in the class in the country in relation to any of the banking or NBFC system. We have got the positive feedback from RBI as well as CAG, where consecutive third time nil comment has come. Oversight, compliances, ERP all go hand in hand with robust results. On top of it, we also have to look for a long pipeline.
While doing the con call, I will be talking about the exciting time that we are going to have with all the announcements from the railways also. Apart from that, the good business that we are doing in non-railways entities in the railway ecosystem, where we are garnering higher margins. Taking two together, we will be talking about the exciting time going ahead and maintaining and sustaining the growth that we have done in the six quarters, trailing six quarters, including this particular one. With this, I invite you all to have a discussion. Thank you.
Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Sucrit D. Patil from Eyesight Fintrade Private Limited. Please go ahead.
I have two questions. The first question to Mr. Dubey is, beyond the regular outlook, just want to understand what are the top two to three execution priorities you are focusing on in the next few quarters. Alongside that, what do you see as the biggest risk in terms of railway CapEx, asset growth opportunities or funding, and how are you preparing to manage them while strengthening IRFC's role in the finance space? That's the first question. I will ask a second question after this. Thank you.
You talked about risk of the railway funding or what? I did not get that. Can you repeat again, the second part of your first question?
Yeah. I just want to understand the key strategic actions you are focusing on-
Oh, yes.
Such as maybe expanding the asset base, diversifying the finance opportunities. Along those lines, can you give some guidance?
I got your question. Yes, first part of the question was what are our immediate disbursement targets. Yes. Last year when we started diversifying all INR 35,000 crores that we disbursed, that were non-IR disbursements. This trend will continue for this FY. Next, H2, you'll find that we'll be lending to metro, we'll be lending to ports, we'll be lending to renewable energy, we'll be lending to thermal power Gencos who are having link with the railways. We'll be lending to maybe few road linkages also. These are all in pipeline. Almost ready to be disbursed in Q3 or early Q4. To answer your question in a very clear manner, the guidance that we're given that in FY 2027 also, we'll be surpassing our disbursement that we did last FY, and that guidance remains intact.
The second part of the question that you asked is more exciting because this funding that we're doing right now, that will, if anything, it won't be continuing for long because ticket size is not more than INR 20,000 crore or INR 10,000 crore, like this. But the second part that you mentioned about railways, if you're following our Honorable Minister Railways, and also the Honorable Prime Minister, what he announced, there is a sanction of a dedicated freight corridor from Dankuni in eastern part to Surat in western part. This 2,000 km plus , this costs around more than INR 3 lakh crore. There are seven high-speed rail corridors that are already sanctioned and very actively being pursued because country is moving towards Viksit Bharat kind of thing. Railways has also announced eight freight lines where they will be going on JV, joint venture model or PPP model.
Overall, the pie that comes out to be is more than INR 20 lakh crore. Once we have our hand on these pies, these are going to continue for next minimum 10 years. Precisely the first half of this FY, we are actively engaging with all the stakeholders within the railway as well as the bilaterals. Because you see, the pie is so big that IRFC alone also won't be able to fund everything. What is happening is that we are kind of being the sole financing arm of Indian Railways. Are acting as aggregators. My team is already talking to World Bank, to other multilateral as well as domestic players. We believe that by end of this FY, this whole model will be in place and the way you follow the government, because our disbursement is completely aligned to the aspirations of Government of India.
If you believe that, yes, Government of India is going to have the dedicated freight rail corridors, if you believe that Government of India is going to have these high-speed rail corridors, if you believe that government is really going to have four laning of the tracks, then you believe that our hands are completely full with the kind of business coming in next 10 years. That is what I'm talking to you. Maybe Q3 when we come out to you, we'll be giving you clear numbers and the guidances, what model is going to be followed. But right now, what is available in the public domain, I'm only repeating that.
That we are completely in sync with the ministry, both ministry, Ministry of Railways, Ministry of Finance as well as other multilateral, bilaterals trying to get a solution where IRFC will have the first right on the pie. That pie, I can give you a flavor. That pie will be going forward maybe from FY 2028 onwards for next decade, minimum INR 50,000 crore every year coming from the Indian Railway stable. Also to mention you, now that we have started diversification, we are not going to stop funding to non-railway entities in the railway ecosystem. You will see hand by hand looking at us funding the metros, looking at us to funding government ports. Looking us to fund the renewable requirement of the Indian Railways.
Now that we have started our journey, maybe FY 2028 onwards for nonstop 10 years, you'll find that this kind of disbursement, maybe in tune of INR 50,000 crore plus minus will be continuous growth for Indian Railway Finance Corporation.
Thank you. My second question to Mrs. Deepa Kotnis is, from a financial point of view, what key risks or challenges do you anticipate in the coming quarters? What specific measures are being taken to manage net interest margin, borrowing cost, asset quality, and balance sheet strength, especially in an environment of changing interest rates and large funding needs? Thank you.
Your questions are akin to asking question for her that she will take over as CEO of the company, on the lighter vein.
Thank you, Mr. Patil, for your question. IRFC has already got a very diverse borrowing portfolio. We are very actively looking at reducing our WACC by increasing the share of 54EC bonds and also ECB so that borrowing cost, we already are least cost amongst other NBFCs, and we hope to continue the same thing. We hope to continue in the same way because at the moment, 6.55% is our WACC compared to other NBFCs, which is much higher, 50 lower. We hope to continue the same way.
Thank you and best wishes.
You can ask me again, because I think I noted down borrowing cost and NIM. The question went a little fast. You can repeat perhaps.
No, if you have any guidance on that, please share. Otherwise, my questions are being answered.
Okay. Thank you.
Good.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Next question come from the line of Priyam Shah with Trinetra Asset Managers. Please go ahead.
Hi, sir. I just wanted to understand what is our internal three to four year target in terms of AUM growth and how aggressive we will be in terms of disbursements. Because I think, the INR 5 lakh crore AUM target for this was supposed to be for this year, but I think we've missed it once or twice. I just wanted to understand the internal vision and our growth targets.
As I mentioned to you, we stand by the target of reaching near about INR 5 lakh crore, maybe more than that, maybe a thousand or 2,000 missing on that is fully intact. If you look at our journey of IRFC 2.0, we started at INR 4.60 lakh crore. I mean, INR 4,60,000 crore on the beginning of FY 2026. We ended up the year at INR 4.85 lakh crore. So that upward journey was there, and this is also taking into account of whatever payment capital recovery that we're getting from the railways. We are completely comfortable, hopeful. We know what assets we are going to disperse in next H2.
I can assure you that the way we have beaten the guidance for our revenue, the way we have beaten the guidance for our PAT in not one quarter but consistent two quarters at H1, rest be assured that asset under management also will be reaching near INR 5 lakh crore, maybe crossing it. Maybe by the end of Q3 only you'll get the flavor that we are almost there. But end of the year, for sure, the way we did last year, because bulk of our disbursements are done in H2, we have already things in place to disperse. Now, I'm again repeating very clearly for all the investors. We are not changing growth of AUM just for it. There is a reason behind that.
You see, all my asset under management, nearly 90% + today also stands with the railways where the NIM is only 1.3%, or in absolute terms, 35 paisa margin on cost plus. You look at the beautiful and sweet spot for this company. Whatever non-IR business that we are garnering, here the margin is minimum 2 x, and at times it is 3 x or 3.5 x also. So what will happen that even if my AUM growth is not very robust, it won't be growing in double digits. That's fine. But my PAT will always be growing near to double digits for the fact that whatever assets we are replacing was of 35 basis points, whatever asset I'm adding is more than 100 basis points. So the yield will be nearly 3 times of what we were doing with the Indian Railways.
So understand very carefully that even if I am maintaining the AUM size of INR 5 lakh crore, you rest be assured that my PAT will be growing nearly to 10%, not for a year or two, but if we continue with this mode and the way we have forecasted that by 2030, our mix will be 60% pure railways and 40% will be diversification. Rest be assured that till 2030, there is no look back. PAT of this company will keep growing year to year on those lines. I hope I have answered your question.
Sure, sir. Thank you.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one . Our next question comes from the line of Manish Agarwalla with PhillipCapital. Please go ahead.
Yeah. Hi, good morning, sir, and congratulations. Just want to understand, how is our loan priced in the non-railway businesses? How frequently are the interest rate revised there? The context was, in the rising interest rate scenario, how fast can we pass on if there is an incremental increase in the cost of fund? That is one.
Manish, you have a very nice question because nobody was talking about these things. You are very right. There is a repo enhancement by 25 basis points. Not only that, I must add that also for you and other people who are listening to us or who will be reading our con call later on, because most of the people read the con call later on. There is increase in TONA also. Back-to-back TONA increases are 25 basis points. We are one of the aggressive consumers of JPY. I tell you the numbers. In terms of JPY consumption, last year we did nearly $2 billion. We started with 1.8%. With TONA increase also, we are landing somewhere at 2.25%. The things which are passed on cost-plus model, it's a win-win scenario for both because nobody gets a loan less than 3% in the country.
Even where we are taking it on our books, when we are doing a very conservative hedging, my cost of hedging has not crossed 6.3%. There are hedging at 5.9% also, there are hedging at 6% also, and the latest that we did during the turmoil of Hormuz also it is 6.3%. You see, our overhead cost is nearly 15 paisa only. We don't add much to the cost of borrowing that we get. On JPY side, I want to confirm to you that despite the fact that TONA has gone 50 basis points ahead in only three, four months, maybe one more revision comes. We are extremely comfortable with those kind of rates that JPY is offering to us. Coming to domestic market and the answer to your question.
There are reset of three months, there are reset of one month, there are also reset of one year. It acts both ways. It at times helps us also, at times helps the borrower also. Rest be assured that it doesn't impact negatively to us much for the fact that our total borrowing portfolio, as my CFO mentioned, is varied. We are not only having the term loan from the bank only, it is only around 25% of my total mix. Overall, we always have discussion of 20, 30 basis points of any kind of such happenings. But the beauty is, on the both sides. When we were funding the Indian Railways, all these the Indian Railway. We remained insulated either for positive or negative. My margin of 35% only was there. It was on the lighter and not very exciting business.
You know that your profit is fixed. Whatever happens in the world, it doesn't affect your profit as a company. When we have started diversification, we have taken into account all these fluctuations that can take place. In every scenario, what strategy we have followed is that we must make at least a margin of 90 paisa, 85 paisa minimum. My ALM team is very particular. They are monitoring it on a real-time basis, maybe on a weekly basis, reporting to the top management. Not much of impact, as I told you. Yes, we also have the flexibility of switching away from the term loans when they are getting costlier to other instruments. If RTL becomes cheaper, we have the flexibility to go back to them and use that also. That is what the borrowing team does in a very smart manner.
As my CFO mentioned to you, we are maintaining a country best WACC, weighted average cost of capital, that is 6.55% that we did last year. This year also, we hope to maintain that despite the hardening of the rates. If we are able to garner 30 or 40 basis points cheaper resources than the peers, you can understand what wonders it can do to us in terms of ensuring our margins as well as competing for IRFC for the best plus assets and winning it. And precisely, that is the foundation from where IRFC is doing consistently excellent results in terms of PAT for last six quarters. I believe, leading the management team here, that this success story will continue in the similar manner as you've seen in the last six quarters. Thank you.
That was helpful, sir. One more question I had was on prepayment rates. Two of your competitions, I won't say competition, maybe government lenders, have been facing prepayment pressure in last one and a half year. Is there any kind of prepayment pressure for us visible right now or-
Manish, you are there?
Yes, sir, I'm there. Am I audible?
Yes. You are audible.
My question was on the prepayment rates. Some of the government lenders were facing prepayment pressure in last one year. Is there any prepayment risk for us in our business, especially in the non-railway business?
Yeah, on.
Ladies and gentlemen, we have management with us now. Thank you, T. Menon. Over to you.
Sir, will you be able to listen to my question?
Yes, please go ahead.
Yeah. My question was on the prepayment risk. Some of the state lenders are facing prepayment risk like REC, PFC of the world. Are you also looking at any pressure on the prepayments?
This is the only pressure that I am not having. I am having all other pressures with me, but thank you for asking this question and making me feel good about it. I am perhaps the only NBFC in the country who is not having this pressure. There is reason behind this. The reason is, my unique selling point, wherever I have gone for the last 2 years, I have given three comfort to my borrowers. Number one, there is no prepayment penalty. Listen to it very carefully. I have given first proposition to all my prospective borrowers that, "Listen, we are not putting any prepayment penalty," while others, you know better than me that what kind of penalty is being put on that. Number one. Number two, we are saying that there is no floor price.
If the benchmark is having a decrease, I will pass on the benefit to you. If the benchmark is going up, I will pass on the risk to you. These two things have really gone up well with my customers, my borrowers, and they have got tremendous confidence and rapport with us. Answer to your question, why we are not finding the pressure of prepayment, for the fact that we are cheapest in the market. We sell ourselves like this. If we are cheapest in the market, why somebody will prepay my loan? I was morning thinking about it. The basic thing that we are taught in the management school is that leveraging the business is always a profitable business. Obviously, everybody would not like to put all their equity in the business.
When you want to leverage, if you are getting best in class kind of lending rates, why somebody will prepay? On the lighter vein, asking your questions, I get a feedback that for the last two years, we are disruptors in the market. We say that we are positive disruptors in the market. For the fact that we are a government company, and if we are bringing in our efficiency of low overhead cost, small team, taking bigger responsibilities, and serving the government entities, it is always good to pass on the money on a win-win scenario where I am making a handsome profit and I am passing on the loan at a very cheaper rate. In fact, if you see my last year portfolio, the others prepayment majority, we are refinancing it. That is a business proposition for us.
Now we have proven in the country that if anybody wishes to have a lower rate, proving to us that they are best in class assets, their ratings are A, then we are looking for them and we are arranging cheaper loan. As my CFO mentioned, we are having the lowest WACC perhaps in the country. I hope I have answered you.
Yes, sir. Thank you very much. That was helpful, sir.
Thank you. Our next question comes from the line of Sunil Kumar, an Individual Investor. Please go ahead.
Hi. Thanks for giving me the opportunity to ask a question. I was following this company and the performance quarterly basis, and felt good every time I saw the results and the kind of improvement in the margin and everything happened. I am a bit concerned as in, it is just what happened in last two years in terms of stock price and the way it has moved in two years due to either OFS or anything else. What are your suggestions to government or even for shareholders to understand how we can have better value in near future or even longer term in terms of share price and dividend distribution?
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I think we have given enough labor to you. Rest I request and advise you that you keep following us. We keep communicating very proactively and we are very transparent in sharing what all we are doing and what Indian Railways is doing also. You kindly follow what Indian Railways is doing also.
Thank you.
Thank you.
Thank you so much. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Reminder to all the participants, if anyone wishes to ask a question, may press star and one. Thank you. As there are no further questions from the participants, I now hand the conference over to the management for the closing remarks. Thank you and over to you, team.
Thanks, Sunil. I think I have spoken enough with all clarity. Nothing more to add. Just to sum up that the way we are giving out the numbers that we have come out in this FY for H1, we very seriously believe that this growth story will continue. The numbers that you shown in H1 will be kind of replica of what is going to be in H2. Our AUM, yes, we are all geared up that we will be doing better than what we did last year. All ratios that people follow, we believe that the way ROE of this company in this H1 to H1 has grown in double digit, nearly 14%. Even ROA has also grown near 5%. We believe that return on equity is also positive.
So all ratios, as I always say that if you follow the profit numbers, PAT numbers, every ratio comes out of that. We believe that the diversification story that IRFC has started on will continue in a positive manner. And when we meet after Q3 results, we come out with the same number or even better number. Thank you so much.
Thank you so much, sir. Ladies and gentlemen, on behalf of PhillipCapital India Private Limited, that concludes today's call. Thank you for joining us and you may now disconnect your lines. Thank you.