INDIAN RAILWAY FINANCE CORP (NSE: IRFC) Q1 2026 Earnings Call dated Jul. 23, 2025
Corporate Participants:
Manoj Dubey — Managing Director, Chief Executive Officer
Randhir Sahay — Chief Financial Officer
Analysts:
Parth Jariwala — Analyst
Unidentified Participant
Mohit Jain — Analyst
Jeet Shah — Analyst
Ritika Behera — Analyst
Pranav Gupta — Analyst
Tanuj Kyal — Analyst
Presentation:
Operator
Ladies and gentlemen good day and welcome to the IRFC Q1 FY 2025-’26 Earnings Conference Call, hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Parth Jariwala. Thank you and over to you Mr. Jariwala.
Parth Jariwala — Analyst
Thank you. Good morning, everyone. Welcome to the Q1 FY ’26 Earnings Call of Indian Railway Finance Corporation Limited. From the management, we have with us Shri Manoj Kumar Dubey, Chairman, Managing Director and CEO; Shri Randhir Sahay, Director, Finance and CFO; and other senior management with us. I’ll now hand over the call to Shri Manoj Kumar Dubey for his opening remarks, post which we can open the floor for question and answers. Over to you, sir.
Manoj Dubey — Managing Director, Chief Executive Officer
So thank you, Parth, and very good morning to everybody. Delhi today has got a very good rainy morning. It’s very pleasant. And incidentally, it’s Maha Shivratri also. So it’s very auspicious time. And we are also happy to supplement it with good numbers that we came out yesterday evening. As you know, all the key parameters have shown good positivity, a few in a decent manner and few in a steep manner. In fact, the top line has grown in a decent manner and the bottom line has grown in a steep manner.
We’ll discuss that in detail when we do the Q&A session. So I’m joined here with my Director Finance and CFO, my Head of Business Development, other key senior executives. As you’ve seen from all the numbers that we have published, we are walking the talk what we started two quarters back in Q3 of last FY. As you are aware, for the last two FYs before the beginning of this FY, disbursement to Indian Railways was in fact, to any of the entities were nil for this company. So that was a little lull period so far as disbursement was concerned. And we embarked upon our new journey that we call IRFC 2.0, where we started looking for diversification within the whole of railway ecosystem, not limiting ourselves only to single client in railways.
Well, that was a new move in the history of the last 40 years of this company, but I’m very happy to share that the team IRFC, strong but — strong and small team, I can say, they rose to the occasion. And as you see today in last six months or so, we are sitting over a healthy order book of more than INR25,000 crores. Disbursement has started. Q1 has shown decent disbursement of nearly INR3,000 crores, but we’ll discuss in Q&A how we have got the plan in place that as per our guidance that we gave in the beginning of the FY. Our disbursement will see a kind of acceleration in Q2, and we’ll be doing more than what is required to be done in H1.
We continue to secure the lowest cost of capital among peers. And true to our ethos, we are sharing this benefit directly to our customers. As you know, our overhead cost is also minimal in the whole ecosystem. So this competitive edge strengthens our balance sheet, coupled with zero NPA and stable cash flows. This literally sets us apart in the ecosystem. We are just not giving a very attractive pricing, but we are fostering a true partnership for longer period. So this company, unlike other NBFCs we’ll be seeing minimal or very less prepayment. That is something kind of ethos that we are going to put in our system. If we are going to make some partnership in terms of lending and borrowing with any of the partners, it has to be a long-term win-win scenario. This is going to give us an edge, the kind of query that we are getting from all over all the CPSE, state government, metro railways.
We are really excited to have those kind of queries. In fact, the team is working overtime with the kind of inflow of the customers, which is for any company is something which is very, very rosy. People are happy to work extra for garnering more of the business. At the same time, with cuts of repo rate, there is a pressure on the kind of margins that the whole ecosystem is garnering nowadays. We are comfortable for the fact that our overheads are lowest in the ecosystem. So it hasn’t affected us much. But yes, — we are not only competing with NBFCs per se, we are competing with every existing bank of the country. And that gives us a very interesting proposition that how IRFC positions itself, not only competing with the NBFCs, but also with the banks for arranging cheapest kind of resources in terms of the funding to anything coming in the whole of government approach.
And when I say whole of government approach, the private entity fits in the manner that if any private entity is entering into any kind of joint venture or any kind of PPA or any kind of concession agreement with the government, for us, they become a government entity. So the pie is big. The team is set, and we are looking forward to quarters coming every time when we walk up a talk. And the motto of the company is that every quarter should be better than the last in terms of top line, bottom line, all the financial parameters.
So now we are open to question-and-answer session. Thank you.
Questions and Answers:
Operator
Thank you. We will now begin the question and answer session. [Operator Instructions] The first question comes from the line of Raghu [Phonetic] with Travist Capital. Please go in.
Unidentified Participant
Hi. Good morning. Thanks for the opportunity. Please excuse me if I’m missing out something. My question is regarding how is our cost of capital at 5% because the government bond yield itself is 6.3%, 6.2% right now. How are you able to achieve this 5% of cost of capital?
Manoj Dubey
No. Who said you 5%, I think there is some confusion regarding, from where you got these 5% numbers?
Unidentified Participant
Yeah. Because the total — our borrowing is around INR4,14,000 crores. Per quarter, we are paying an interest outgo of around INR5,000 crores. So it makes INR20,000 crores per year, right, so.
Randhir Sahay
It’s not about 5%. It is because of our business model. We fund two type of assets. One is the project asset and other is the rolling asset. So major portion of the project assets, around INR2 lakh crores is still to be — we have to execute the agreement for these assets. And whatever interest cost we incur for these assets, it will be added to the loan amount and it will get capitalized. So accordingly, it is not getting reflected in my P&L. That is why you are getting such a low number. Otherwise, my cost is around 7%.
Unidentified Participant
Oh, cost of capital is around 7%. Okay.
Manoj Dubey
It is hovering around 7%. As you know, that was the accounting system that we have with the railways where the projects are having a moratorium of five years, okay?
Unidentified Participant
Okay.
Manoj Dubey
So till the time it is — agreement is not signed and the moratorium is going on, then it is all accruing in the interest. And later on, it is transferred into the capital when the agreement is signed. So this is what my BD head was telling you. And so far as cost of capital is concerned, yes, it is hovering around 7%, but still cheaper than what others are getting in the market.
Unidentified Participant
Okay. And just one more question I have is we have the — presently there is no corporate tax for us on our — for our company. So generally, what is your view? What is your view of how long can this continue? Is there any indication or something which you have saying it can come sometime in the future?
Manoj Dubey
So I can only assure you that next five to six years, we did not talk about it. And that’s a longer period. So let’s talk about it somewhere in 2030. I hope I answered your question.
Unidentified Participant
Yeah, yeah, it’s answered. Thank you so much.
Operator
Thank you. [Operator Instructions] Next question comes from the line of Mohit Jain with Tara Capital Partners.
Mohit Jain
We have a sanction and I think our annual target is to disburse around INR30,000 crores. You have witnessed so far we have disbursed INR2,500. So sir [Technical Issue]
Manoj Dubey
No, you are not audible clearly.
Mohit Jain
Can you hear me now, sir.
Manoj Dubey
Yeah. But it is getting deemed in between. So be near to the voice.
Mohit Jain
Yeah. I am, okay, so moving to a better place now. Can you hear me, sir?
Manoj Dubey
Yes, yes, yes, please go ahead.
Mohit Jain
Yeah, So I’m saying, sir, we had a guidance of — we said initially that we have INR60,000 crores disbursed — sanction target for the current year, and we plan to disburse around INR30,000 crores in the current year. And I guess you hinted that so far, we have disbursed INR2,500 crores of loans. So how should we look at this number going forward for the entire year?
Manoj Dubey
Oh, that’s a good question that has come to your mind, looking at the numbers. So the factual position today, I’m sitting over nearly INR25,000 crores sanctioned projects, right? And a few more big tickets are in pipeline. Now out of this INR25,000 crores sanctioned projects, you rightly mentioned that in Q1, we disbursed around INR3,000 crores which is pretty low in terms of the total target of INR30,000 crores. But the key here is that out of this INR25,000 crores that we have sanctioned, many projects are of refinancing nature.
Earlier, we were funding only to Indian Railways, not to even the SPVs of the Indian Railways in the ecosystem. They had very high-cost loans on the bank. So all are coming to our kitty now. So all these loans are sanctioned and they are in the process of disbursement. And as you know, in case of refinancing, the whole amount is disbursed in one go. So answer to your question is this that by Q2, we expect that we’ll be doing 50% half year mark of what we have given the guidance for the whole year.
Maybe we can exceed it also. Even if we don’t, but we don’t, but we are quite pretty sure that by Q2 with this kind of refinancing disbursements, things will even out. And we are pretty on track of what we have given the guidance in terms of disbursement as well as in terms of the sanction of the loans.
Mohit Jain
Understood, sir. So the annual sanction is going to be — the guidance is going to be around INR60,000 crores?
Manoj Dubey
Correct, correct.
Mohit Jain
Okay. Okay. And sir, I guess moratorium of many of the projects have been over now. So what is the rundown of — the annual rundown that we expect from the existing loan book? Is it something like INR10,000 crores per year?
Manoj Dubey
Absolutely. You’re right, for next three to four years.
Mohit Jain
So basically, should we expect INR30,000 crores of disbursement.
Manoj Dubey
No. You said — again, your voice went out.
Mohit Jain
Yeah, I’m saying should we look forward to loan growth now because the disbursements are going to now exceed the rundown of the old book?
Manoj Dubey
So you are doing my job. So you are making it clear for everybody. So you are bang on. You are bang on. So this quarter, we just broke even at INR4.59 lakh crores, just nearly INR400 crores down last quarter of my AUM. So you are pretty on the point that going forward, every quarter, we’ll be seeing a decent improvement in my asset under environment also.
Operator
Mr. Jain, are you done with your question?
Since there is no reply from the line of Mr. Jain, we’ll move to the next. That is Mr. Jeet from Pinpoint.
Jeet Shah
Hi sir. Am I audible?
Manoj Dubey
Yes, yes you are quite audible.
Jeet Shah
Could you talk about your new disbursement yields versus your current book yields, please? What would be the difference? And what explains the margin improvement in this quarter?
Manoj Dubey
So you see NIM that we have come out for this quarter is 1.51 which is quite above what we showed last quarter that was nearly 1.31. So as I mentioned in the last con call also if you go through it, what we said that the new businesses that are coming is not coming from IR, where there was a fixed 40 bps or 35 bps contract. So here, we are either competing or discussing across the table.
In fact, most of the assets we are competing only, the good quality assets where RSP is coming out. Wherever we have got LOM, we are still finding that because of our low overhead cost, which is giving us a lot of legroom. My margins are two to three times of what I used to get from Indian Railways. So that will surely come into NIM. Now overall, because the total INR4.6 lakh crores is coming from the railways at 40 bps and 35 bps, if you ask for overall improvement, it won’t be very steep right in the beginning. But for the additional asset that we are entering into our system, the NIM will be more than 2%.
So to summarize the things going forward, you’ll find that every quarter, IFC’s NIM is getting better and the yield on the PAT is also getting better, which is morning — so the days like this particular quarter, you saw my Q1 to Q1 PAT jumping in terms of double digits. It is precisely nearly 11% of the jump. So this story will keep unfolding going forward quarter after quarter.
Jeet Shah
Okay, understood. So NIM should structurally improve from here. On AUM, you’re saying INR5 lakh crores by the end of this financial year.
Manoj Dubey
Next FY. I didn’t say — just correct yourself. I said that somewhere in next FY, that is ’26, ’27 we may see our net AUM going past INR5 lakh also the way we are looking at the kind of flood of the business that we are getting as query. Of course, we are doing the cherry picking. We are a net — I mean, zero NPA company, and that is our main focus. So out of all the queries, even for the government side that we are getting, we are doing the cherry picking. But still the pie is coming so big in terms of big ticket sizes that we feel that we are sitting in a very exciting time and good proposition.
Jeet Shah
Sure, sure, sir. That’s clear. And just in terms of these new businesses, right, including the loans and sanctions to NTPC. So this is a completely new field for you, right, which involves the power sector, which I presume would not have a lot of linkage to your existing business of railways.
Manoj Dubey
You may be aware that NTPC is one of the biggest suppliers of power to Indian Railways. So there is a clear linkage.
Jeet Shah
Okay, okay. But how much do you intend to grow in the power sector?
Manoj Dubey
You see the railways requirement today is 8-gigawatt to 9-gigawatt. So — and 90% of that is coming from the other than railway sources. So all these power suppliers who are now shifting to renewable and Indian Railways also wishes to get net zero by 2030. It’s a very challenging task. So we are moving towards that. So all renewable projects who are going to supply and get into a power purchase agreement with Indian Railways through their zonal units, they are our clients — direct clients. There is a joint venture of railways called REMCL.
We have already entered into MOU with them. They are facilitating the power purchase agreement of this renewable supplying companies to the units of Indian Railways. The moment they enter into PPA, they become our prospective clients. And of course, because we are here to cater to them at a very attractive and a cheaper rate, we expect that anything in the renewable coming to the Indian Railways, which is going to be 8 gigawatts in the next five to six years, all are similarly our business itself.
Jeet Shah
Okay. Understood, understood. That’s clear. And what would be the reason that you don’t have to pay any corporate tax?
Manoj Dubey
So let us hear from my BD head.
Randhir Sahay
It is because of the leasing business model we are following. So we have an unabsorbed depreciation for the assets what we lease to the railway. And from ’18, ’19 onwards, we have opted 115BAA. And because of that adoption, we are not liable to pay any tax under MAT. And we have a lot of unabsorbed depreciation that will be — going forward also for a foreseeable future of five to seven years, that will be sufficient to absorb whatever income we have — whatever taxes on that income we have. So in the next five to seven years, we don’t expect any tax liability on the company.
Manoj Dubey
I hope we clarified you.
Jeet Shah
Yes, yes. That’s clear. Just one last thing. So these loans that you’re refinancing, would these largely be from banks? Or would this be from other NBFCs? And what is the rate differential that you’re offering on these, please?
Manoj Dubey
So we will not be naming anyone. But of course, once we have positioned ourselves cheaper than all the NBFCs and banks, of course, the business will be coming from both of them. Not only these guys, there are something bilateral foreign loans also, which we are going to replace because there also with the devaluation of rupee and dollars going high, has become very costly to our siblings in the railway ecosystem. So all these businesses are coming the plateau. So what was the second question that you asked?
Jeet Shah
Yeah, that’s — I just want to know, is it from banks or NBFCs, but yes.
Manoj Dubey
But yeah, everyone. Everyone.
Jeet Shah
And yeah, what is the rate differential that you’re offering?
Manoj Dubey
Rate differential is minimum 100 bps. At times, it is 150 bps also. So we are bringing a lot of comfort and relief to the entities who are working in the railway ecosystem. And that is what this company is meant for. But the beauty is that, that after subsidizing them by 150 bps, the other competitive rates were so high that we are still making good money and far more than what we used to make from Indian Railways. So that is what is giving us a very win-win and attractive solution.
Jeet Shah
Understood. Understood. And sir, last question, if I may — okay, sure. I’ll get back into question.
Manoj Dubey
There are others also in line. Go ahead. Go ahead with the last question.
Jeet Shah
On the 100 bps worth of repo cut that we’ve seen, are you passing it on to your borrowers at the moment on the back book?
Manoj Dubey
Absolutely, absolutely. Absolutely. The ethos of this company is whatever we are saving in terms of the cheaper borrowing that we are getting in the market. In fact, a few weeks back, we raised one five-year tenure bond at 6.45% or 6.5%. So these are the rates we are getting the bond. So whatever cheaper raw material of the financing we are getting, we are obviously passing it to our borrowers. And if you don’t pass, then we can’t compete.
We are not in the business of high risk, high-margin assets. We are in the business of zero risk attractive assets. And incidentally, we found that they were also being funded at a very high cost. I mean government is not supposed to get a funding at 9.5% and 10%. In my view, that is not the correct kind of — because government is also doing business. And anybody who is doing business has the right to get the fund at a cheaper rate. What we are actually doing is we are making more margins than what we used to get from the railways.
Still we are becoming lowest in the government system and that is giving us a very good impetus acceleration. It’s a win-win scenario of people in all CPSE parlays, government parlays, state government, they are coming to us because now they know that RFC is funding to every government entity who are having good rating. And that is why we are feeling that going every quarter ahead, we’ll be having good business on the hand. We have to do cherry picking, and we have to ensure that we remain zero NPA going in the future also.
Jeet Shah
Sure, that’s very clear. Thank you so much.
Manoj Dubey
Thank you.
Operator
Thank you. [Operator Instructions] Next question comes from the line of Raghu [Phonetic] with Travist capital. Please go ahead.
Unidentified Participant
Yeah. Just a follow-up on the previous question somebody was asking. Your borrowing cost is 7%. What is the spread on — suppose you’re funding a metro project, what is the spread on that particular loan, which you’ll get? Is it 2%? Or is it 2.5? What is the spread?
Manoj Dubey
So you see the metro as a project for us is something unique because we are a government-owned company in major like and metro is a necessity for the nation. It is not a business. As you know, none of the metros, including Delhi metros are profitable in terms of totality. Somebody is making cash profit, Raghu, maybe Hyderabad Metro, Delhi Metro. But you think of Delhi without metro. I mean, it is impossible to cater to the logistic requirement of this huge population. So what is the answer? The answer is metro is going to be there. And it is the responsibility of the government per se to ensure that metro in India is flourishing. Today, we have got more than 50 metros either working or sanctioned or in a phased manner.
Having said that, all these metro requires funding, and they require the cheapest kind of funding. The earliest segment for these metro railways where the bilateral funding comes from Japan or World Bank or ADB or many other things. In 20 — last 20 years, the government has realized that these loans are not so straight and cheaper loans. They have got many riders on it. There is currency fluctuation, there is SOFR and TONA rates. There are other tighter things that you buy things from that company only then you avail the loans. So these kind of things are tying the hands of the state government and the central government. So what we are planning is we are — because we have been funding cheaper to the Indian railways, maybe a model where we can tell metro railways that you have a cost-plus model and you have this 40 bps margins on that, we can agree to that also.
Answer — to summarizing the answer to your question is, we are geared up to bring as cheaper as possible the funding to the metro railways of this country with the guarantee from state and central government, where my loan is guaranteed. But the margins, yes, we have agreed and ready to fund them as cheap as possible in the system because we want to set a benchmark that if government wants to invest money, and if they want to have extra budgetary resources, IRFC is a conduit who will bring in money not only from domestic market, but from the EC market at the cheapest rate and all benefit will be passed on. And we will be having the minimum kind of markup on that. And that market is not anything to guess.
We already have a benchmark with railways, which is 40 bps. This is the gamut we are trying to plan and this FY we’ll be coming out with a very clear solution for all the prospective metro railway funding in the country. I hope I clarified.
Unidentified Participant
Yeah. But because the reason I’m asking is the cost of capital for — if suppose — don’t get me wrong because I’m quoting your competitor. For REC is something around 7.05% or 7.1%, okay? So they generally lend to anything with a spread of 2.5%. So that is the reason why I’m asking. So generally, for any infrastructure project, what will be your spread because you’re expecting a NIM of more than 2%. right? So that means your spread.
Manoj Dubey
You are asking the question and giving the answers also. So NIM — I’m expecting a NIM of 2% and what is their NIM?
Unidentified Participant
Their NIM is 3.5%, spread is 2.5%.
Manoj Dubey
Yes. So my spread will be obviously at least 100 bps lower than them. Why? The answer is also very clear. It’s not secret. Their — what is their overhead cost? If you’ve done your mathematics, then you must be knowing. What is the overhead cost, REC, PFC and HUDCO?
Unidentified Participant
I think it is something around 0.4% to 0.6%.
Manoj Dubey
No, it is 0.8%, 0.9% and 2.5%.
Unidentified Participant
Okay.
Manoj Dubey
REC, PFC and HUDCO. Mine is 0.1%.
Unidentified Participant
Yeah. But now because we are expanding into these new areas and all, don’t you foresee our overhead also to — a bit — expand a bit?
Manoj Dubey
We have foreseen. We have got a very concrete plan. My upside will be from 0.1% to 0.15% itself. It won’t cross 0.2%. So that’s the plan, right? So we are in a business of B2B. The cutting edge is that we are not going to put any overhead burden on our system. We are committed to deliver in a manner which is cost effective. And we have a plan in place. In the B2B model, we do not foresee that our workforce will grow to as big as our peers. You know their numbers and you know our numbers. So that is our advantage, and we want to maintain it. To clarify it, we don’t foresee our overhead cost going even 0.2% in next two to three years. So clear advantage of 70 bps will lie with us so far as we are — I mean, compared to our peers.
Unidentified Participant
Okay. So can I ask you one more thing? So are you interested in lending to even DISCOMs and things like that, if suppose some DISCOMs approaches you?
Manoj Dubey
No, no. Absolutely not. This is not at all in our discussion right now. Let me be very clear. DISCOMs are — they are — there are siblings there. PFC, REC it is their domain area. They are competitive in that. Yeah, GENCOs, only those GENCOs who are supplying to Indian Railways. Let’s also be very clear about it.
Unidentified Participant
Okay. So for a normal conventional power project or something you are not interested, you are not going to fund them?
Manoj Dubey
You talk about GENCO — so you talk about DISCOM. DISCOMs we are not going to fund right now. That is not in our portfolio, and we are not looking at that. You talk about GENCO, yes GENCO we are going to fund if they are having a linkage with the Indian Railways. Even the mining, coal mining if they’re having a linkage with the Indian Railways, we are going to fund them.
Unidentified Participant
Okay. One last thing. Anything related to infrastructure? Other infrastructure projects and all, even that.
Manoj Dubey
See Railways is defined as infrastructure. So even railways.
Unidentified Participant
So apart from railways, maybe road, etc., etc.
Manoj Dubey
Let’s be very clear. Right now, our mandate and our limitation is that we are funding anything which are having backward and forward linkages with the railways. So yes, like if you say a port is coming, having a railway linkage, yes, we are going to fund it.
A fertilizer factory is coming having a linkage with the railway line and every production of fertilizer is going to be hauled by railways, yes there is a linkage. So these kind of infrastructure projects, which are having a direct linkage to the railways, they are our baby. But something in stand-alone happening, yes, we are not having a look at that.
Unidentified Participant
Okay. So if a port just has a railway line and a port cost maybe INR50,000 crores, IRFC is ready to lend them money if there is a railway linkage?
Manoj Dubey
YesWhatever part of it, yes we’ll have a look for sure.
Unidentified Participant
Okay. No, that’s great. No, I just want to find out the scale of the opportunity that’s all.
Manoj Dubey
From this if you are finding out because you are rightly asking and everybody is rightly asking this question. For the fact that we never deal with these things. So it’s good that you are asking these questions, and these things must get spread also that we are funding all the infra projects having a backward and forward linkage to the railways. Of course, a rider is there.
We are very particular about the quality of the assets. As you know, we are perhaps the only GNPA company. And we wish to remain that. That tag for my investors, we remain to keep that tag. So we are very, very critical about looking at the quality of the assets. So yes, if they fulfill our benchmarks are — if they are ticking all the boxes that we need to, then anything who are having a linkage with the railways, we are going to have a look for funding.
Unidentified Participant
That’s great. That’s really great. Thank you so much.
Manoj Dubey
Thank you.
Operator
Thank you. Next question comes from the line of Raman Kumar [Phonetic] an individual investor. Please go ahead.
Unidentified Participant
Hello. Good morning. My first question is with respect to the projected sanction of INR60,000 crores. So how much of that would be approximately on the leasing model and how much will be on the term loan model kind of a thing? Because right now, most of our assets are under leasing model. So just want to understand in the future.
Manoj Dubey
My BD Head will take up this question.
Randhir Sahay
Mainly it will be on the term loan model. Basically, we are also funding on the leasing model to some of the entities. But the quantum would be around INR2,000 crores, INR2,500 crores, but mainly it will be on term loan basis to various entities, those who have a linkage with the railways and those who are operating in the infra space.
Unidentified Participant
Okay. And in case like there was a news article about funding of NTPC rolling stock wagon. So those will be on leasing model or those will not be all?
Randhir Sahay
Those will be on the leasing basis, and we have some other inquiries from other entities also. But the total quantum would not exceed more than INR2,500 crores. With NTPC, we have executed an agreement of around INR700 crores. And some deals are under discussion, and they will get finalized in due course. But the total quantum would be around INR2,500 crores.
Unidentified Participant
Okay, got it. Thank you. And my another question is with respect to the leasing model. So I understand the IRFC follows the primary lease period of 15 years and secondary of another 15 years, but most of the money is recovered from the Indian railways within 15 years. So initially — I think in the beginning, there was no problem. But right now, because of too much investments on infra relating to railways, it is putting a strain on Indian Railways finances like paying within 15 years because most of the operations of Indian Railways are kind of on breakeven situation. They don’t have extra money to pay.
Manoj Dubey
So you are giving a very good advice and solution to Indian Railways. So it is for them to take a look. Right now, what model you mentioned is in the place. But what you proposed, I can only say that it is something for the Indian Railway to look at it. If our proposal comes from their side of any kind of this, yeah, company — it doesn’t harm us in any way increasing the tenure if they wish to.
Unidentified Participant
Okay. And is there a way like you can — possible for IRFC management to push — like to put in place like this proposal to Indian Airways or most of the proposals come from their side only.
Manoj Dubey
That is something between CPSE and the government. It is not the domain where we should talk about. So there is a system in place. And as and when either side needs to talk about something in writing, they talk. But this is not meant to be discussed with the investors, right?
Unidentified Participant
Okay, got it. And one last question is with respect to like the new financing, which will be mostly on term loan model. So will the interest rate be fixed for long term? Or will it be a floating kind of a situation, which will keep on changing based on underlying rate?
Randhir Sahay
Rate, whatever we have sanctioned, it is on the floating basis. As of now, in the ecosystem, nobody wants a fixed rate kind of a scenario, and we have to operate as per the market condition. And if someone wants on a fixed basis — fixed rate basis, we are open to it, and we can discuss and we can structure the deal as per the requirement of the prospective borrower.
Unidentified Participant
Okay. And the floating rate underlying is like weighted average cost of IRFC internal funding or like external benchmark? Is it internal benchmark or external benchmark?
Randhir Sahay
We are using various benchmarks. We are using AAA benchmark. We are using repo rates as well. It is based on the — how the prospective borrower want the deal. And my lending rate would be decided based on the credential of the project, based on the tenure of the project, what is the risk appetite of the borrower and what would be the interest rate scenario going forward. And based on these parameters, we decide what benchmark we should use and how to structure the deal.
Unidentified Participant
Okay, got it. That’s all from my side. Thank you very much.
Operator
Thank you. Next question comes to the line of Ritika Pera with Bandhan amc. Please go ahead.
Ritika Behera
So sorry, my questions would be a little repetitive, but if you could just reiterate your guidance on sanction and also on disbursement and AUM for this year and next year, if you’ve given for next year as well?
Manoj Dubey
Well, you want for next year also?
Ritika Behera
Sir, if you’ve shared in the call, then yes, I missed something.
Manoj Dubey
That is quite wishful. I’m happy that you are covering us and you are having the interest. So I can only say the guidance that next year also, your interest will be intact as we are on the rising path. So whatever we have given the guidance for this year, that will surely remain a benchmark for next year also.
Ritika Behera
That’s very helpful, sir. But if you could just share the guidance again, which you’ve given already for this year? I actually missed the numbers.
Manoj Dubey
Okay. This year, we gave a guidance in the last quarter itself. When we began with this FY, we have targeted around INR30,000 crores for disbursement and around INR60,000 crores for sanction of the assets.
Ritika Behera
And as I see in your presentation, you’ve given that total sanction already till date is INR23,000 crores. So you are expecting that another — further some INR40-odd thousand crores to come during the year. Is that the right way.
Manoj Dubey
Yes, yes, yes. It may go up. I mean it is a ballpark figure. So it is never like you stop at INR60,000, you don’t go more than that. So it is a kind of ballpark. When we started in the FY, as you know, this was a first of its kind for this company. We never ventured outside Indian Railways. So with the kind of inquiries and enthusiasm that we found to our customers looking at our products, which are very cost effective and time effective also. So we thought that this is the kind of good numbers that we should come out.
And to give a flavor again, the last two con calls, I always give this comparison, INR30,000 crores that we wish to disburse, it should be akin to nearly INR75,000 crores to INR90,000 crore loan that we would have done to the Indian Railways for the fact that only 35 bps was coming from there. So here, the margin is more. So INR30,000 crores, if we are able to disburse, it will be akin to something of the highest that we used to do for Indian Railways in terms of the margin. So that is what we are targeting this year.
So — and as you mentioned numbers yourself, I think INR23,000 crores we have already done, and we are right in the first part of the Q2. So I think we are well on the target. And we believe that by the end of the FY, we should meet it very comfortably.
Ritika Behera
Sure, sir. Sir, if I could just extend this. So obviously, these are — these being large projects, obviously, the disbursement takes time. And as I see that you’ve done INR3,200 crores disbursement this year — this quarter, sorry, of the sanctioned of INR23,000. So just two questions here. How much of the INR60,000 — so you roughly feel that 50% of the sanctions would be disbursed this year, and that’s how the INR30,000 crore number. Any color that you can give on the balance INR27,000 crores to be yet to be disbursed? What is like you have given.
Manoj Dubey
I think you joined late. So I have to repeat again and.
Ritika Behera
No sir. Sorry, that’s okay, sir. I’ll may be listen in the recording, not a problem.
Manoj Dubey
No, no. So the kind of project that we have sanctioned, quite a few of them are refinancing, okay? So — as you know, refinancing is done in one go. So all these refinancing projects are already sanctioned and they are already lined up for Q2 out of the INR23,000 crores. So we expect that more than INR10,000 crores will be disbursed in Q2. So making it even for H1. So by the time we — end of Q2, we believe that nearly 50%, maybe 40%, maybe even 50%, maybe a little more than that disbursement should take place.
So we will not be very hard-pressed going in H2. This is the crux of the answer that you wanted to know. So all these numbers which were — you see on the sanctioning of the project side, we are quite ahead in one quarter. On the disbursement side, we are lagging behind. So by the end of Q2, you’ll find that we’ll be even in both. We’ll be having nearly 50% of the disbursement done. And of course, nearly 50% or more of the loan sanctioned. So this is how the things are panning out. I hope I clarified and it is good to hear to you.
Ritika Behera
Yes, certainly. And lastly, you said that INR5 lakh crores for FY ’26 is the number you gave may be somewhere.
Manoj Dubey
Somewhere, I said no, FY ’27. FY ’26 already we are on. I said that next FY, that is FY ’27, I can’t predict. I hope I could have predicted. But I believe that the way we are governing the business, I believe that one of my young officers from my BD team gave me a presentation showing some rosy pictures. I’m not telling you the numbers. But yes, out of the rosy pictures, I believe that the way we are going ahead, sometime in FY ’27, we should cross INR5 lakh mark of assets under management for this company.
Ritika Behera
Great sir. Thank you so much. Thank you.
Operator
Thank you. Next question comes from the line of Vikas Kasturi [Phonetic] with Focus Capital. Please go ahead.
Unidentified Participant
Yeah. Good morning, sir. Good morning, sir.
Manoj Dubey
Good morning sir.
Unidentified Participant
Sir, you mentioned — during this call, you mentioned two or three times about ensuring zero NPA. So — and you also mentioned about that the company needs to tick a few boxes. So if you could just provide some color on this, sir, how do you ensure, especially when you’re lending to a private entity, and you have a 30, 40-year track record of having zero NPAs. And now you are venturing into lending to outside Indian railways. So what are some of these boxes that you look for to ensure that you have zero NPAs even going forward? And I have a related question to this, sir. If NPAs do arise because that’s the normal thing that happen whenever you do lending, would that affect your AAA rating?
Manoj Dubey
So fine that you raised this question. So first, to answer your question, right now, let me be very clear, we have not funded anything private nor we are looking right now to fund anything private. This is the first remark. Second remark, our mandate has extended to whole of government approach. So the definition of whole of government approach in India is, of course, any entity of central government, CPSE, where majority of share is held by government of India and of course the state government. So these are our prime customers now. Within the government system, we believe that there is negligible chances of any of the government entity getting [indecipherable] and getting NPA. This is the first lever. This is the first box that we need to take.
Amongst the government assets also, we are doing our due diligence because today, the government assets are also getting rated. So today, the rating agencies of the country are very robust and more than one rating agencies are there who are rating all the assets, and they are quite convincing also. So within the government also, we are looking for A-rated assets. So this is another box we are ticking. The third thing is if we are going to fund assets like metro railways and all where the fair works model is not seemingly sufficient to take care of the loan responsibilities, we will have a clear cut comfort from state government and the central government who are the promoters. Without that, we won’t go ahead. So these are the boxes we are ticking, which we’re talking about of ticking, a ring-fencing ourselves to ensure that going forward, we do not get into any kind of NPA whatsoever.
Now the third thing, how the private players will come into the picture? Yes, private players can also come into the picture if they are entering into a joint venture or a kind of long-term PPA agreement or any kind of concession agreement with the government. For example, I’ll give you a flavor of railways. Railways has got a joint venture model where they create SPV. In that SPV, minimum 24% — 26% of equity comes from one of the CPEs of the railways and 74% theoretically can come from a private entity also. However, they are all state governments and other CPSEs. Now this entity is not a CPSE entity. It’s a SPV. But the modality is that the land is owned by Indian Railways and concession agreement goes for 25 to 35 years. End of the concession agreement, the whole project, which is tangible will come back to the railways. Now think of a scenario that something happens in between, say, 10 years, 15 years.
Now this property is on the land of Indian Railways, so everything will come to Indian Railways. So I still have the comfort that I’m dealing with my promoter itself and it’s a tangible asset. So that risk is heavily minimized. So we are looking in these terms only. So far as CPSE is concerned, we are funded to NTPC, you know they are AAA-rated assets. We are funding to renewables where the ratings are always AAA or AAA stable. So the answer to your question is within the government parlance also, we are doing our cherry picking. Why we are doing cherry picking? We are doing cherry picking because we are not into the high risk, high margin business. We are not looking for 2.5% and 3% or 300 bps margin.
We know that our margins will be at the max touching 120 to 150 bps. And that also is a very wishful thinking if I’m getting 100 bps — 50 bps in this kind of scenario if the asset quality is extremely good. Because we were working in a field where we were getting 40 bps, 50 bps or 100 bps with purity of the business that it is zero NPA kind of asset, it is extremely gratifying and satisfying to us and to my investors also. So I hope I’ve given you the clarity on how we wish to be zero NPA in coming future also by funding to entities in the government, having a whole of government approach other than IR.
Unidentified Participant
Okay, Got it sir. And a related question, sir, in one of the first conference calls that IRFC had, the then MD had said that there is a backstop arrangement with railways that in case any day IRFC is unable to service its debt, it would be done by the Indian Railways. So now that you are lending to all these other entities, would that arrangement still continue?
Manoj Dubey
I mean for the railway funding that we have done to IR, yes, that arrangement, whatever you mentioned is there. Whatever I’m funding other than IR, we are doing — on the strength of our balance sheet. We have got a very robust network with us. So we know how to do the business on these lines. And that is why we are not going beserk [Phonetic] in the attracting business. If you do that, maybe I’ll be able to garner more than INR1 lakh crore in one quarter, the kind of queries we are getting.
But as you know, we are going very safely and in a very steady manner. As I clarified you that we are not looking right now for anything private, even having a very good rating because my plateau is full with what queries I’m getting from the government. And that is our mainstay, and we wish to remain to that mainstay for next two, three years. Later on, we’ll see how things are panning out.
Unidentified Participant
Got it, sir. Thank you sir and wish you all the best.
Manoj Dubey
Thank you.
Operator
Thank you. Next question comes from the line of Pranav Gupta with Aionios Alpha Investment Management. Please go ahead.
Pranav Gupta
Hello. Yeah. Good morning, sir, and thanks for the opportunity. Most of my questions have been answered. Just a couple of clarifications. When we look at the new entities that we’re lending to that are either forward or backward linked with the railways, and obviously, we have the comfort of the multiple comfort that you mentioned earlier. But is there any specific guarantee that is being provided by these entities or by the state governments? Or is it just based on an understanding that eventually, obviously, the projects will go to the railways and the railways will sort of service the debts?
Manoj Dubey
See basically, it depends upon what type of asset I’m funding and to whom I’m funding. And what is the tenure and what is the structure of that deal? In some of the cases, where we have a concern regarding the future cash flows. So we generally ask for ring-fencing of those risks. But wherever we feel that the external rating is very quite good and they have a robust financial model in place and their cash flows are quite predictable, in those scenarios we may exempt. We don’t ask for the government guarantees. Hope I’m clarified.
Pranav Gupta
Understood. So just a follow-up on that. So if you think of, say, a metro project that we are funding, in those cases where cash flows might vary versus that are done at the initial part of the project, in those cases, I would assume that you would have a ring-fencing on the cash flows of that project eventually when it gets commissioned.
Manoj Dubey
I think for metro, we discussed at length, and I clarified very clearly that metro is not a model where fair box model will be enough to cater to the disbursement — I mean, servicing the loans. So of course, when we are going to fund the metro, in the past also, whatever bilateral loan to metro has come, it has come through DEA, Department of Economic Affairs and there is clear guarantee from state and central government. So if at all we are going to fund anything, which we are already in process of discussion, we are going to follow the same model.
In case of metro railways, 100% guarantee has to come from the promoters who are central government and the state government in a similar manner as they are guaranteeing it to the bilaterals and multilaterals. Once that is done, we are safe and we are happy to fund. Yes, right now what I’m very clearly telling everyone that with the metro railway, I’m not here to make very huge margin. That is not done. So metro railway is something in the national service. And with my robust balance sheet, with my low overhead cost, if I’m making INR0.30 out of that, it’s very good, and we are very happy doing that. Because we have got some other mix in the bag where we are earning more also.
Pranav Gupta
Understood, sir. That’s very clear, very clear. Sir, the second clarification was around the other bit of book where the spreads are slightly higher than what we do in the railway or metro sort of financing. Is it fair to assume that those loans also come with, say, probably a 70, 80, 100 basis point spread at best?
Manoj Dubey
Repeat the question again.
Pranav Gupta
So obviously, in the cases of projects that are sort of guaranteed by the government, where we are happy to make a much lower spread, for the other parts of the book where the spread is slightly higher, is it fair to assume that the spread sort of cap out at 90 basis points, 100 basis points?
Randhir Sahay
Right, Right. You are right. Wherever we have a deal like CMD sir has apprised you, like in case of a metro, where all the risk got ring-fenced and we have a cost plus kind of a model. So we are happy to have a 40 bps kind of a margin. Wherever we have the risk — all the risk on my book. So I need to have more margin to cover those risks.
And in that scenario, I would be charging margin more as we are getting in the past. But as of now, our main focus on the quality of the asset. Our main trust that we should fund the quality asset. And my margin to cover all those risks would be in the range of 80 to 100 bps as CMD sir has briefed out.
Pranav Gupta
No, absolutely, sir. And sir, sir, last question for all the external borrowings, are the risks on ForEx fully hedged? Or is it partially hedged?
Manoj Dubey
So that’s a business model that we have multiple models going by the tenure of the loans. So we have hedging model also. At times, we — it’s a longer tenure, then we try to wait for a few years to get better yield. So that’s a model which is a model being followed in this company. And as you know, borrowing side of this company is very strong that we have been doing for a number of years for Indian Railways. So we are good at it. So it’s a mix. So answer to your question is, it’s a mix.
Pranav Gupta
Absolutely, borrowing side is absolutely strong and totally get that. If you could give out any number as to how much of those borrowings will be hedged and how much would be unhedged that will be great, sir.
Manoj Dubey
Numbers, we won’t like to share with you right now. So — but yes, as and when ballpark, I can tell you that anything which is within five years we tend to hedge it.
Pranav Gupta
Sorry, just to clarify, the shorter tenures are hedged and the longer tenures are not hedged?
Manoj Dubey
Any tenure which has come up within five years’ time, we tend to hedge it.
Pranav Gupta
Understood. Understood, sir. Great, that that’s all from my side and thank you for answering all the questions.
Manoj Dubey
So for now we’ll be taking last question. We have already — this time, you have stressed it, and I’m happy that a lot of queries are coming, but still that one hour time we should follow. So the last question would come.
Operator
Thank you. The last question comes from the line of Tanuj with DSP.
Tanuj Kyal
Hi sir. Just on the sanctions, the INR230 billion sanctions this year, sir, what are the yields you expect in this business like the ones with NTPC? Yes, if you could share that?
Randhir Sahay
It would be in the range of 70 bps to 150 bps, what we are charging from various customers. But we can’t tell you customer-wise, but this would be the band.
Tanuj Kyal
Sorry, 70 bps spread you mean, like 7% cost of fund and spread.
Randhir Sahay
That is based on the quality of the asset, tenure of the loan, the credit rating. So on case-to-case basis, we decide the spread and our spread would be in the range of 70 bps to 150 bps on a case-to-case basis. But customer-wise, we can’t share with you.
Tanuj Kyal
Understood. Understood, sir. Sir, and your employee count, how has that changed? Like will that increase materially over time because you’re getting into newer segments sort of so.
Manoj Dubey
Both we are expanding. In terms of percentage, we have grown 50%, but the base was so small that 50% has added only nearly 20%. We are getting excellent tailwind from government as well as from other CPSEs right now. And again, there is cherry picking in talents also. So as people are attracted to this company for business, so talents are also getting attracted to this company. So as CMD, I’m very happy that I’m able to garner the best of the talent avalable in government as well as in CPSE parlay [Phonetic]. We are now around 60, and we look forward to be 100 or 110 in next five years’ time.
And having said that, we still want to be the best of the talent in small numbers using the other facilities around right from the consultancy, advisory, AI, whatever you tell it. And since we are into B2B business, unnecessarily, we don’t want to add the manpower numbers. So we are going to stick to a good office, very, very technically sound office very soon by the end of this FY. So we want to invest more in the machines and the analytics than unnecessarily manpower. So we will — to answer to your question is the manpower will grow, but grow in a very considered manner. At the end of the day, we will ensure that my overhead cost is not getting higher than 0.15% in two, three years. That’s the answer.
Operator
Thank you. Ladies and gentlemen, due to time constraints, 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.
Manoj Dubey
So thank you, DAM Capital. So two quarters back, I started with you. We could hardly take the questions for 30 minutes. So I’m happy that queries are more. This is my third quarter, and we could do it 1 hour and still see people are there to ask questions. That speaks volumes about the interest that we have generated into IRFC. DAM Capital is a partner to the journey. I’m thankful to you that you are doing it on our behalf.
We ensure to our investors, in fact, retailers are in a big number, that this management under the guidance of Mr. Railways and Mr. Finance are totally committed to deliver what is required for the investors. We are on the growing trajectory. We are not very rash. We are driving very carefully. We have got our accelerator and brake in place. We’ll tick all the boxes. We’ll drive very carefully, but the speed will always go and go on and on in terms of our top line and bottom line. Our country is having a very exciting time.
Honorable Prime Minister has set 2047 as a target for Vikasit Bharat. This is the real [Foreign Speech] for the country. The next 20 years are the time and everything will grow. And in the growth spectrum, IRFC is all geared to play a very important role. And of course, since we are in business, we want to grow in a very positive manner, catering to the need of the nation, being a national service and also growing our finances in a better manner. So I wish that all my shareholders stay with us and be partners into this growth and the national service also. Thank you.
Operator
Thank you. On behalf of DAM Capital Advisors, that concludes this conference. [Operator Closing Remarks]
Manoj Dubey
Thank you.