INDIAN RAILWAY FINANCE CORP (NSE: IRFC) Q3 2026 Earnings Call dated Jan. 20, 2026
Corporate Participants:
Manoj Kumar Dubey — Chairman & Managing Director (CMD)
Randhir Sahay — Executive Director Finance
Unidentified Speaker
Analysts:
Manish Agarwalla — Analyst
Mohit Jain — Analyst
Amit Agicha — Analyst
Deep Vakil — Analyst
Vikas Gupta — Analyst
Gaurav Bansal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Indian Railway Finance Corporation Limited Q3 FY ’26 Earnings Conference Call hosted by PhillipCapital India Private Limited. As a reminder, all participant lines will remain in the listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I will now hand the conference over to Mr. Manish Agarwalla from PhillipCapital India Private Limited for opening remarks. Thank you. And over to you Manish.
Manish Agarwalla — Analyst
Yeah. Good morning, ladies and gentlemen and welcome to Q3 FY ’26 earnings call of IRFC Limited. We have with us Mr. Manoj Kumar Dubey, Chairman and MD&CEO; Mr. Randhir Sahai, Director of Finance and CFO. Now I request Mr. Dube to take us through highlights of Q3 performance and outlook going forward. Post which we will open the floor for Q&A. Over to you Mr. Dubey.
Manoj Kumar Dubey — Chairman & Managing Director (CMD)
A very good morning Mr. Manish and good morning to all participants. Very good morning from the team of IRFC. I’m accompanied with my Director, Finance as well as my Principal HOD and HOD here. We are very happy to talk to you today post our Q3 results yesterday. Numbers must be already with you. As we started this FY three quarters back it was a new era for IRFC being entering into a diversification mode from single client system that we had for nearly 38 years to multi-client mode in the railway ecosystem. It was little uncharted territory. We have given ourselves tall guidance of sanctioning assets up to INR60,000 crore for the whole year as well as without having any pipelines, prior pipelines, disbursement targets of INR30,000 crore.
We worked really hard as a team for the first half and based on those hard work and testing ourselves into the market through open bid procedures, quarter three has really been something where we got the fruits of our hard work. When we ended on 31st of December this calendar year ending our quarter three the numbers that came out is we have already surpassed our guidance given for sanction of assets. Our disbursement picked up in quarter three and we have almost done three fourths of what we said for ourselves for INR30,000 crores. As we envisaged in the beginning that whatever assets we’ll be getting the margins would be quite better than what we used to get from Indian Railways in the line of 2x to 3x. Precisely the same is happening despite having very stiff competitions with the lowering of repo rates on the banks also.
But our inherent strength of having low overhead cost as well as our positioning in the borrowing market being zero NPA company garnering cheaper rates are helping us in passing out this benefit to our customers. The highlights were — of Q3 were raising our ECB loan for the first time after a break of nearly three years. That was a very, very attractive rate, perhaps best in the market that anybody got in yen currency. We also tested zero coupon bond and perhaps we are the only company in the country who successfully did it in the calendar year 2025. We got a good rate also.
Overall the company is well positioned now with very healthy pipelines going forward, living to the expectations and the guidance that we have given that our PAT should grow every quarter. Our NIMs would grow every quarter. Our asset under management should also grow every quarter. These are the three indicators of FCNC and the yield which we are focusing on. Going forward the revenue of the company also will be looking up from next FY onward as the agreement will be signed within railways and the new assets that we are sanctioning, disbursement will speed up and all these will be adding to our top lines also. So overall, here we are after the end of the three quarters on a very solid ground of our IRFC 2.0 version where we are remaining as a sole financing arm of Indian Railways. But also we are catering to the whole railway ecosystem at a very attractive rate.
Thank you very much.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We take the first question from the line of Mohit Jain from Tara Capital Partners. Please go ahead.
Mohit Jain
Hello. Hello, can you hear me? Good morning sir. So, just wanted to have your explanation for the amount which is appearing in provision written off as a line item there. It has increased significantly in the current quarter. What is the reason behind it? Because I guess we still don’t have any NPA in our books.
Manoj Kumar Dubey
You must be aware about the RBI guidelines. From 1st October onward, whatever assets that we are entering into agreement, there has to be some — mandatorily some provisioning is to be done. So it is those provisions which are just simply a provision. It is not NPA. So this is for everybody now.
Mohit Jain
Yeah.
Manoj Kumar Dubey
Your voice is not coming clearly. Yeah, please go ahead.
Mohit Jain
Yeah, I’m saying so these are standard asset provisions basically.
Randhir Sahay
Yeah, yeah, yeah. It is a standard asset.
Manoj Kumar Dubey
Absolutely. Absolutely. So otherwise you can add this INR50 crore into our profit and you can safely say that our profit is INR1,850 crores and nearly 13%, not 10%, two years. Right?
Mohit Jain
And sir, as regards to AUM, I got the view that you know that’s going to increase on a quarter-on-quarter basis, any sort of a number or any sort of a growth rate that we can look forward for, let’s say for FY ’27 right now?
Manoj Kumar Dubey
Mohit, you see when we started the year we were really under hard press conditions because for the last two years, nearly three years in fact there was no disbursement to the railways which used to be our single client. Now you see how quantum jump is taking place. So in one quarter itself we jumped from INR4.6 lakh crore to INR4.75 lakh crore. There are two things. One, our base is very big. So we are not a small NBFC. It is already, I mean INR4.75 lakh crore. There are not many of the NBFCs which are running this balance sheet size.
So yes, what I said that we’ll be doing positively for the fact that whatever reimbursements will be coming from the railways for the old loans that we’ve given will surely be disbursing more than that. Now how much more is a question which I mean we are also looking to answer for the fact that there are two good things about us. We are not looking for any small ticket kind of business. So we are strictly into B2B and our efforts are that we should look for the clients which are having potential of raising around INR10,000 crores to INR15,000 crore from us. And one ticket is not less than INR5,000 crore. This is the kind of B2B system we are looking forward to. So if say three or four more assets we garner in the Q4, so you will put the numbers,
I mean disbursement norm typically for a greenfield project it takes three to four years, you disburse everything. So numbers we won’t be putting. But I can tell you one ballpark figure that this company’s AUM will be hovering around INR5 lakh crore which is not a small thing, A. B, this INR5 lakh crore plus-minus whatever we will be having for next three to five years, more and more assets with bigger margins will be added up. Morning at CNBC and other TVs also spoke about that in the next five year plan, 2030 plan that we have made, in this 2030 plan we are looking forward to a mix of 60/40; 60% coming from the Indian Railways and 40% of the mix coming from the railway ecosystem where the margins are nearly three times of what we get from the railways. So better you put number on our NIM, better you put a number on our PAT. AUM, I can only tell you that it is going to grow and it should be somewhere INR5 lakh-plus going ahead. This is what we envision here in the company.
Mohit Jain
And sorry on the timeline for the INR5 lakh crores, is it like a 2030 target or in the near future only?
Manoj Kumar Dubey
I mean what we have set forth is five-year target where we are looking forward to 20 new entities for us for whom we are doing cherry-picking and appraisal. These 20 entities we intend to fund around INR15,000 crores each. So INR3 lakh crore we wish to add through 15 entities only in the next five years. So we are sitting over here at INR4.75 lakh crore, INR3 lakh crore we want to add in next five year time through this 15, 20 clients. It comes out to be nearly INR8 lakh crore. So there will be some reimbursement from the railways also. So that is why I’m not putting a specific number. What I answer to you is that we believe that going forward AUM of this company will be INR5 lakh crore plus.
Mohit Jain
And so just one clarification on the 40%, the non-railway ecosystem that we are looking forward to, are we facing any kind of a competition? Because the other players, the PSU players in the private, in the space, basically they are having a slower growth rate right now and they have become, they are trying to becoming more competitive. So are we facing any competition out there in the 40% piece?
Manoj Kumar Dubey
Mohit, we are here for competition. In fact we are inducing competition. We are strictly not in favor of any across the table discussions. We are a government company. In fact anybody who is coming to us for across the table lending also we are advising them to come out with the open RFP, right? And yes, the answer to the question is there’s a very healthy competition for us for the fact that we are looking only for pristine best kind of assets. So the moment you look for those kind of assets which are A rated, AAA rated, obviously there is competition. But it suits us. It suits us on two counts.
One, it endorses our view for zero NPA kind of asset. Two, we were working all the way for 40 bps margin. So we are getting 100 bps margin, 120 bps margin despite the competition. So our NIM is going ahead. So the answer to your question is competition. we are inducing competition in the market and we are, we are very happy doing it. We are getting good competition with banks also. NBFCs are by and large not very competitive because of the fact that our overhead is low and our cost of borrowing is cheaper but few kind of assets at times banks are really competitive with us and we are very happy competing with both the kind of entities.
Mohit Jain
Okay. Thank you. Thanks a lot, sir.
Operator
Thank you. We take the next question from the line of Amit Agicha from H.G. Hawa & Company. Please go ahead.
Amit Agicha
Good morning. Am I audible?
Manoj Kumar Dubey
Yes, Amit, please go ahead.
Amit Agicha
Thank you for the opportunity. Congratulations for good set of numbers. So what is the expected execution timeline for INR17,000 crore exposure where IRFC has emerged as L1 and how much of this can realistically flow into FY ’27 AUM?
Manoj Kumar Dubey
It is pretty much online and if you have information from somewhere, it is on the line and agreements will be signed very quickly. There is no issue in that. All due diligence is in place. Legal things are being done. And as I mentioned the first question that generally for a greenfield project, normally two to three years, we disperse everything in the agreement.
Amit Agicha
And is there a long-term dividend payout policy that investors can anchor to like, especially like given the company’s stable cash flow and nil credit costs?
Manoj Kumar Dubey
Please say it again. Talking about dividend.
Amit Agicha
Yeah. Is there a long term dividend policy?
Manoj Kumar Dubey
Yes, dividend policy is already in place. So I mean if you look at our dividends in the last five years it will give us very — because we are a government company on the lighter end, you know how it does, how it pans out. So if I understand correctly, we have been very steady in giving our dividends. This year, interim dividend was quite higher than what we paid last FY. And rest be assured if the PAT is growing, so dividend should also grow. This is my understanding. But the final call is taken by the Board.
Amit Agicha
And so the last question from my side, like how does management internally benchmark the company’s valuation as a sovereign proxy, an infrastructure NBFC or a utility like annuity business?
Manoj Kumar Dubey
So let us hear from our BD head.
Unidentified Speaker
Currently we are focusing on the good quality asset and and then we are following the whole of the government of India approach and in near future we are envisaging that we will be funding only to the government entities and the the entities which which have a strong linkage with the government. I mean going forward we will intend to fund only those infra project which has a backward and forward linkage by following the whole of government India approach.
Amit Agicha
Thank you for the detailed responses and all the best for the future. Thank you.
Manoj Kumar Dubey
Thanks, Amit.
Operator
[Operator Instructions] We take the next question from the line of Deep Vakil from Bandhan AMC. Please go ahead.
Deep Vakil
Good morning, sir. Am I audible?
Manoj Kumar Dubey
Yes, yes, Vakil. Please go ahead.
Deep Vakil
I mean I’ve been tracking IRFC since a couple of quarters on con call. So what I understand is that our cost of funds is the lowest in the industry which is approximately sub 5% and earlier we used to make margin of 40 bps on railway projects which is now 100 bps on — I mean in the diversification plan 2.0 apart from railways. But you have been — I mean earlier there was no need of credit underwriting or something on those lines because it was — I mean Indian Railways is sovereign so there was no risk of default. But considering now we are moving into 60:40 trajectory with around I mean 20 odd new exposures being added of around INR15,000 crores each in next five years. So I mean, I mean I heard that you mentioned it all those entities will be linked to GOI backwardly or forwardly. But do we have some benchmark that it will be all AAA rated? I think you gave loan to NTPC.
So I mean there are still risk of NPA remains nil in this IRFC 2.0 approach as well or because the competition is pretty healthy as you mentioned. But I mean the only benefit what we have is the lowest cost of funds. So can you just throw some light? Why we have that benefit and what is the cost of funds as of, I mean the recent weighted average cost of borrowing.
Manoj Kumar Dubey
So you understand the fact that you mentioned in the beginning that whatever low overhead cost that we had earlier it was all being passed on to Indian Railways as a single client. Now that we are giving loans to the entities who are having any linkages with the railways. Of course this 70 to 80 bps benefit that we had lower cost of overhead that is being now divided between the customer as well as ourselves. So nearly I believe 40 to 50 bps is coming out of that low overhead cost to our kitty as profit. Perhaps you want to know about our risk factor that going ahead with 40% alone.
So you see we funded one for DFC, Dedicated Freight Rail Corridor. We funded for NTPC. All our assets are all in public domain, you can see their ratings. Ratings as mentioned, we are obviously going for all A rated assets. We are cherry-picking even the Gencos. We are not going for any Gencos and Transcos who are not rated A generally in the system. So our cherry-picking in all the ecosystem that we are doing it is up to be seen by the investors or the potential investors. We believe that those government entities which are having very strong balance sheet, strong cash flows and the kind of new venture that they are going in there is absolutely negligible chance of NPA, A. B, yes as per the RBI guidelines even for entity like DFCCIL where the payments will be coming directly from GOI to us still provisioning norms are there for CA, for capital adequacy as well as for the assets. So yes those things will be there.
But you know our capital CR/IR today also is nearly 160%, again the norm of required number of nearly 25%. So we have a lot of legroom still to go for these kind of assets, A. B, as you said provisioning has to be done and it is being done by everybody in the line of RBI guidelines. So those provisions are just a provision, they are not any actual cash hit on the balance sheet. So yes we are entering into the ecosystem other than railways but our appraisal team is very, very particular about the fact that what kind of assets we are cherry-picking and that will remain our mainstay and we believe that by having this kind of scenario within the whole of government approach, we believe that we will be able to maintain our pristine zero NPA system going ahead also.
Deep Vakil
Sir, and what is the cost of funds? Weighted average cost of funds as on date?
Manoj Kumar Dubey
You see cost of fund is sub 7%, so we can’t give you the numbers. But if you look at our numbers we raise our deep discount zero coupon bond at 6.80 for 10 year bullet payment. We raised five-year bond sometime six months back at 6.5%. We raised our ECB loans in the Japanese yen at a very, very attractive rate and even if we add a five-year hedging cost on that it is coming somewhere around 6.2%, 6.3%. So if you add all together with the repo rate coming down our RTL also is quite attractive nowadays. So it keeps varying every year depending upon the mix and the kind of rate that is being offered in the market.
But overall as you rightly mentioned and you are tracking us that we are nearly 20 to 30 bps cheaper than anybody in the ecosystem and our peers. And overall cost is always remaining less than 7%. This is what now at times it may be quite attractive even to 6.5%, 6.6% level. If you ask for the target, we are looking forward to a borrowing mix which is cheaper than the G-Sec rate. This is what at IRFC we are aiming for. I hope I answered your question.
Deep Vakil
Yeah, sir, last question. Broadly, I mean it’s all floating rate linked, right? External benchmark or EBLR. I mean eventually,
Manoj Kumar Dubey
Not necessarily, not necessarily. When you are going for the — I mean we have got all kind of mix. Bond, of course bond is a fixed rate. So if you are buying any five year tenure bond or 15 tenure bond rates are fixed. Banks of course it is linked to either T bill or repo rate, whatever you have. In ECB market it is linked to the currency fluctuation mainly and of course the hedging cost if you are going to hedge.
Deep Vakil
Still after adding 100 to 120 bps to this still, I mean our rates are still competitive as compared to competition rate which is primarily banks.
Manoj Kumar Dubey
So that is why we are winning the bids but we are losing few also. It’s not that we are bidding, we are winning everything we are bidding. That is a best part. And you know one of the good things that we take out of participating into RFP, whatever assets we have participated, participations were as large as seven to even 15 participants from the financial sector. That is a re-endorsement of the fact that we are entering into the area where 10 to 15 companies are doing their due diligence and they are finding the assets at pristine. So whether we win the bid or we lose the bid, we are clear about one thing, that the jury is out on that asset, that it is a good quality asset. And that is something which is very, very important for IRFC.
Deep Vakil
Right, sir. One last thing. I mean as you mentioned that 40% asset will be majorly A rated. So just want to understand, I mean is it only a A, AA or AAA rated or we have some benchmark that we’ll cater majorly to…
Manoj Kumar Dubey
I mean let us not go into, let us not go into those details. The overall thing as an investor you will know that we are going for A rated. Rest Board has its own powers and they look at every asset in a different manner. And finally everything is in sanctioned by the Board and Board of IRFC is very, very particular about ensuring that the asset quality should be very, very good.
Deep Vakil
Congratulations, sir. Thank you,
Manoj Kumar Dubey
Thank you.
Operator
[Operator Instructions] We take the next question from the line of Vikas from Focus Capital. Please go ahead.
Vikas Gupta
Good morning sir and hearty congratulations to you on this fantastic performance last quarter. Sir, just one question. In your answer to the previous participant you said we don’t win all the bids, Some of the bids, we don’t bid. So just want to know what the reason for us to not win given that we would be among the lowest priced competitors.
Randhir Sahay
It’s a competitive bid. Every company give their bid and we also gave our bid which is the best suited to us. So in the market you do not know that which company will give what rate. So it is just a healthy competition, nothing else.
Manoj Kumar Dubey
So to add to my Director, Finance, banks today with deep cut in repo rates for few of the assets where they don’t have exposures. At times one of the banks get very, I mean aggressive in quoting. So that’s fair enough. That’s fair enough. So that is why we are very open to talk about it. It’s not that every bid, despite having the strength of low overhead cost and low cost of — it’s not that every bid we are winning and that’s very good about it. Banks mainly and not every banks, I mean there are, more than the 10 banks are participating. So one of the banks at one time they become very aggressive for one session there they are winning it. But yes, our strike rate is more than 60% in whatever bids we have participated.
Vikas Gupta
And one request, sir, if you could just — earlier we used to have shared investor presentation. If you could just share the same thing and also give us a sense of your how your liability mix is and some of the questions that the earlier participants also asked like cost of borrowing or some of the what do you say your liability makes and so on could be very helpful, sir.
Manoj Kumar Dubey
Noted, noted, noted.
Vikas Gupta
Thank you, sir and wish you all the best.
Manoj Kumar Dubey
Thank you.
Operator
Thank you. We take the next question from the line of Gaurav Bansal from PVC Consultancy. Please go ahead.
Gaurav Bansal
Yeah, good morning. My question is that there has been a dip in NIM and substantial increase in the lease income. Any particular reason for that?
Manoj Kumar Dubey
Did you find dip in NIM vis-a-vis last quarter or general?
Gaurav Bansal
Quarter-to-quarter.
Manoj Kumar Dubey
No, no, you understand this, you understand this. This disbursement of a larger amount took place right at the fag end of Q3. So — but if you compare with last year NIM of Q3 that was 1.4% and we have landed at 1.51%. So just here and there in the quarter to quarter you may not have the right comparison but going forward last year in total FY we clocked around 1.4%. But this year we’ll be clocking more than 1.5%. So that dip is mainly because of fact that disbursement took place only in the fag end of Q3.
Gaurav Bansal
I get it. And how about the quantum jump in the lease income? Quarter-to-quarter again.
Manoj Kumar Dubey
Quantum jump in lease income.
Gaurav Bansal
Yes. So, there’s a jump in lease income.
Manoj Kumar Dubey
Yes, here from our accounts head, he’ll be talking about.
Unidentified Speaker
Yeah. Good morning.
Gaurav Bansal
Morning.
Unidentified Speaker
Yeah, basically the lease income operates based on the lease agreement what we entered with the Ministry of Railways. So in current, in last year we didn’t execute the any lease agreement with the Ministry of Railways, so it got deferred. So in the current year we are going to execute the lease agreement what was due last year as well as in the current year. So the impact of those lease income will accrue in the future periods. That’s why there is a minor dip in the lease income in the current as compared to the previous period.
Gaurav Bansal
Okay, got it. And is there any plans for any buyback? I mean looking at the share price dipping and is the company planning to buy back to shore up the prices?
Manoj Kumar Dubey
I mean we are the Board of the company. We don’t decide for buyback or selling of shares. It is the domain of Department of Ministry of Finance, DIPAM. So they are the real owners sitting on 86% of shares. If they take a call, they’ll be telling the market about that. Right.
Gaurav Bansal
I get it. Thank you so much.
Operator
Thank you. [Operator Instructions] As there are no further questions, I will now hand the conference over to the management for their closing comments.
Manoj Kumar Dubey
Thank you, Manish. We had a good outing in quarter three and we believe that going forward also, stellar show in terms of the numbers will continue. And we are sitting in a pretty good condition now having a good pipeline with us. Yield also is looking up. So going forward, the diversification plans that we have launched in the beginning of the FY now is the time to consolidate on that. And going forward we believe that all the kind of guidances that we have given will continue to achieve those things. Thank you.
Operator
[Operator Closing Remarks]