IRFC COVER-final - Indian Railway Finance Corporation Ltd.

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While the economies the world over have continued to beafflicted by uncertainties and weakness over the last coupleof years, the role played by Indian Railways (IR) as the'engine of growth' of the Indian economy has remainedexemplary. As a significant mover and contributor to thecost structure of various raw materials and finished products,the benign pricing policy of IR has not only contributed tocontainment of inflation, but has also kept the 'wheels ofprogress' moving. Sound management strategies also enabledIR to carry an all-time high 888 million tonnes of freighttraffic during the fiscal. This, together with the buoyancy inthe passenger segment during a period of grave economicuncertainties the world over, has indeed exploded the mythof the loss making nature of the Railway business. NetRevenue of R 5,544 crore despite the huge financial impactof implementation of Sixth Central Pay Commission'srecommendations and increase in fuel prices, has facilitatedputting together of a Plan size of R 39,023 crore in the currentfiscal. Ever engaged in the service of the Ministry ofRailways, Indian Railway Finance Corporation has animpeccable track record of funding rolling stock assetcreation worth R 60,163 crore for IR so far, besides providingfunding support of R 2,294 crore to other Railway entitiessuch as Rail Vikas Nigam Limited, Rail Tel Corporation ofIndia Ltd. etc Your Company stands in readiness, as always,to discharge its assigned role of funding creation ofproductive infrastructure for IR to meet their rapidly growinginvestment and capacity building needs.I would now like to share with you a few of the highlights ofyour Company's performance since the last Annual GeneralMeeting held in August, 2009. You will recall that for theyear 2009-10, your Company was set a target of borrowingof R 9,000 crore for creation of rolling stock assets for theMinistry of Railways and a further amount of R 170 croreby way of loan to Rail Vikas Nigam Ltd. (RVNL) forinvestment in bankable projects being executed by them forMOR. Both targets were revised upwards through RevisedEstimates of Ministry of Railways to R 9,150 crore andR 370 crore respectively in February, 2010. Thus, totalmandate for borrowing during the year became R 9,520 crore.Besides, as reported at the time of preparing final accountslast year, against the target of R 6,907 crore for 2008-09,actual asset acquisition by the Ministry was higher at R 6,991crore. Consequently, the differential amount of R 84 crorehad to be remitted to the Ministry during the year 2009-10.At a total required borrowing of R 9,604 crore, this was thehighest ever quantum of financing of its clients by IRFC in asingle year, exceeding the previous record of R 7,200 croreduring 2008-09 by a handsome margin of 33.40%. As amatter of fact, the target was almost double of the fundingassistance of R 4849 crore provided by the Company toMOR & RVNL just two years back in 2007-08. TheCompany was able to raise this highest ever amount at anaverage cost of 7.70% p.a. as compared to 8.98% p.a. lastyear. The achievement is extremely creditworthy viewed inthe context of the fact that its fund raising effort scored overthe cost structure achieved by similarly rated entities by amargin of as much as 0.90%. This translates to an impressivesaving of R 712 crore in interest cost over the total tenor ofborrowing during the year. Amongst special features of theborrowing programme for the year were the highest everamount of R 2,159 crore raised in a single year throughexternal commercial borrowing at an interest cost of US$LIBOR plus 230bps, and bond issuance of R 385 crore fora tenor as long as 20 years. I am pleased to inform you thatthe Company has since improved upon the latter by issuingbonds worth R 1,175 crore with an even longer tenor of 25years, representing a 'first' for an Indian corporate, again atvery competitive pricing. Besides, the Company issued taxfreebonds for R 1,920 crore, creating in the process a hithertonon-existent market for 7-year tax-free bonds in India.I am happy to further report that your Company continues toenjoy the highest credit ratings of 'AAA' assigned by CRISILand CARE, and 'LAAA' by ICRA, the three largest domesticcredit rating agencies. Its international credit ratings aremaintained at 'BBB- (Stable)', 'BBB-(Stable)', and 'Baa3(Stable)' by Standard & Poor's, Fitch, and Moody'srespectively. Each one of these is at par with sovereign ratingof India, and is investment grade. In addition, your Companyhas an issue specific rating of 'BBB+ (Stable)' from JapaneseCredit Rating Agency (JCRA).During 2009-10, your Company funded acquisition of 476locomotives, 2,267 passenger coaches and 7,843 freight cars,valued at R 9,017.78 Crore, which is R 132.22 crore loweras compared to the borrowing target assigned to theCompany. The difference amount remitted to MOR formsopening balance with the Ministry for 2010-11. With theabove addition to the fleet of the Railways, the movinginfrastructure funded by IRFC stands at 5,060 locomotives,32,115 passenger coaches and 1,39,659 freight cars, valuedat R 60,163 crore.For the current fiscal your Company has been entrusted witha yet again high mandate of raising R 8,842 crore for theMinistry of Railways. In addition the quantum of funding8
for select bankable projects of Rail Vikas Nigam Limitedhas been pegged at R 278 crore.Turning to the financial performance, your Company hasposted a Profit before Tax of R 788.29 Crore and a Profitafter Tax of R 442.69 Crore. Ignoring the impact of onetime items in the figures of two years, the PBT and PAT for2009-10 represent an improvement of almost 20% and21.50% over the corresponding figures for 2008-09. Asrequired under the relevant Accounting Standard, DeferredTax Liability (DTL) of R 210.47 Crore has been providedfor. As you are aware, growth of Net Worth of the Companyhas suffered a slowdown in recent years due to mandatoryneed for providing for Deferred Tax Liability (DTL)including for the past period, besides paying MinimumAlternate Tax (MAT), and high levels of Dividend payouts.Despite infusion of R 859 crore by Ministry of Railways byway of additional equity in IRFC at par during the last threeyears, the above factors have pushed the Debt-to-Equity ratiofrom the comfortable levels of around 6:1 a few years backto levels uncomfortably close to the limit of 10:1 laid downfor Non Banking Finance Companies (NBFCs) such as IRFC.Such adverse movement in debt-equity ratio becomes causefor concern for all stakeholders, including the investors andrating agencies. By way of a conscious effort towardsaddressing the issue, Dividend for the year has been peggedat R 100 crore.You will recall that during the last Annual General Meeting,the Shareholders had passed a resolution for enhancementof the Authorised Capital of the Company from R 1,000crore to R 2,000 crore. I am happy to report that the exercisewas completed successfully during the year. You would alsorecall that such an enhancement had become necessary inorder to attain the twin objectives of keeping the financialgearing of the Company within specified limits andfacilitating efficient discharge of its assigned task of raisingincreasing quantum of financial resources for IR.skills at mobilising large resources at benchmark pricinglevels. Yet, service levels are maintained commensurate withinvestors' expectations, partly by outsourcing some of theback-office activities to professional agencies. There are noun-redressed investor grievances. The overhead to turnoverratio continues at an incomparable level of 0.11%. Thestanding earned by the Company in financial markets at homeand overseas is the direct outcome of its deep understandingof the business, pursuit of ethical and transparent businesspractices and accumulation & nurturing of professionalexpertise over two decades. The support it receives fromthe Ministry of Railways, and the trust reposed by theMinistry in the Company's professional capabilities, haveindeed enhanced its stature.Excellent performance of your Company on a sustainedbasis would not be possible without unqualified andconstructive support and cooperation of a variety of personsand organisations, including my colleagues on the Boardof Directors, officers and staff of Ministry of Railways,Ministry of Finance, Department of Public Enterprises,C&AG of India, Statutory Auditors, Banks, FinancialInstitutions, Securities and Exchange Board of India,Reserve Bank of India, National Stock Exchange, NationalSecurities Depository Limited, & Central DepositoryServices (India) Limited. I wish to place on record gratitudeto all of them. I also acknowledge with appreciation theassiduous efforts of its small team of officers and staff,which have enabled the Company to persistently delivermost valuable performance. Despite daunting challengesto the achievement of the onerous mandate entrusted tothe Company for the current year, I am certain that theintellectual wealth and ingenuity of the team shall proveequal to the task, and the Company shall scale new heightsin its continued pursuit of excellence.Your Company has established a new paradigm ofsuccessfully running a big business with a small team of 20staff and executives. It is now widely respected for itsproductivity levels, pace of decision making, and negotiatingPlace: New DelhiDated: 25th August, 2010.Sowmya RaghavanChairperson9
Page 3: ANNUALREPORT2009 - 10Indian Railway
Page 6 and 7: BOARD OF DIRECTORSSmt. Sowmya Raghv
Page 8 and 9: Chairperson's StatementDear Shareho
Page 12 and 13: Directors' ReportDear Shareholders,
Page 14 and 15: the Task Force, in the MOU meeting
Page 16 and 17: safeguard its operations against ex
Page 18 and 19: compliant form. A roadmap for trans
Page 20 and 21: Right to Information Act, 2005The C
Page 22 and 23: Attendance at the Meetings of the B
Page 24: Remuneration Committee & Shareholde
Page 27 and 28: Annexure - 'A'Code of Business Cond
Page 29 and 30: ANNUALACCOUNTS2009- 10Indian Railwa
Page 31 and 32: PROFIT AND LOSS ACCOUNTFOR THE YEAR
Page 33 and 34: SCHEDULE-3LOANS(R in Lacs)DESCRIPTI
Page 35 and 36: SCHEDULE-3 Contd...LOANS(R in Lacs)
Page 43: SCHEDULE-7CURRENT ASSETS, LOANS & A
Page 46 and 47: SCHEDULE-11SALARY & OTHER EMPLOYEE
Page 48 and 49: SCHEDULE-13BOND SERVICING EXPENSES(
Page 50 and 51: SCHEDULE-16SIGNIFICANT ACCOUNTING P
Page 52 and 53: 10) Employee BenefitsEmployee Benef
Page 54 and 55: In respect of following External Co
Page 56 and 57: (b)During the year 1999 - 2000, the
Page 58 and 59: 17. Disclosures with respect to Ret
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Amount to be recognised in the Bala
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The reconciliation of weighted numb
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CASH FLOW STATEMENT FOR THE YEAR EN
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ANNEXURE REFERRED TO IN PARAGRAPH 3
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Comments of the C & A of IndiaCOMME
Page 70 and 71:
Outdoor Activities
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INDIAN RAILWAY FINANCE CORPORATION
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IRFC COVER-final - Indian Railway Finance Corporation Ltd.

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