IRFC has a unique business model and relies heavily on Indian Railways for profits. As long as the agreement between IRFC and MoR keeps renewing, the company runs a risk-free business despite having high long-term debt. It is the first public sector NBFC to get listed.
IRFC gets the money from the market on the basis of Government Guarantee and lends it to Indian Railways for expansion, operational activities and any other purposes. IRFC will keep on earning interest from Indian Railways. Thirdly, financing companies like Banks/NBFCs are valued on basis of price to book value.
Here are some things that you need to keep in mind before investing:
IRFC has a unique business model and relies heavily on Indian Railways for profits.
As long as the agreement between IRFC and MoR keeps renewing, the company runs a risk-free business despite having high long-term debt.
It is the first public sector NBFC to get listed.
With the Indian Railways looking to expand and reach more people, infrastructure requirements will mean more revenue for IRFC.
However, if the Union Government or MoR changes its policies regarding IRFC, then its profitability can get affected.
Hence IRFC looks a good investment for long term
