IRFC COVER-final - Indian Railway Finance Corporation Ltd.

Happily, your Company posted Profit Before Tax (PBT) ofR 788.29 crore during 2009-10 as compared to R 657.69crore for the previous year, a healthy growth of 19.6%.Likewise, shorn of the need for additional provisioning forDTL for previous periods as had become necessary in theaccounts of 2008-09, the Company has successfully absorbedthe impact of higher rate of Minimum Alternate Tax to posta net profit of R 442.69 crore as against R180.79 crore in theprevious year.DividendYour Company seeks to strike a judicious balance betweenthe need for providing an appropriate return to theshareholders and retaining a reasonable portion of the profitto maintain a healthy financial leverage with a view tosupporting and sustaining future growth. The overriding needfor regulating the Debt-Equity ratio of the Company withinprescribed limits has driven the payment of dividend to theShareholders being kept at R 100 crore during 2009-10,which has already been paid as Interim Dividend. Hence,no final dividend is proposed.ReservesAfter taking into consideration the dividend and dividendtax, a sum of R 45 crore has been transferred to GeneralReserve in compliance with the relevant provisions of theCompanies Act, 1956 and the balance amount of R 280.69crore has been transferred to Bond Redemption Reserve.Share CapitalAgainst Authorised Capital of R 2,000 crore, the entire paidup capital of the Company amounting to R 1,091 crorecontinues to be held by the President of India and hisnominees.Independent Evaluators' AssessmentCredit RatingsDomestic: During the financial year 2009-10, the Company'slong term domestic borrowing programme was awarded thehighest credit rating of "AAA/Stable", "LAAA" and "AAA"by CRISIL, ICRA and CARE respectively. With a view tocomplying with the requirements of Basel II norms, theCompany also got its short term borrowing programme rated,obtaining the highest rating of ''P1+'', ''A1+'', and "PR1+"by CRISIL, ICRA and CARE, respectively.International: During the financial year 2009-10, threeinternational credit rating agencies - Standard & Poor's, Fitchand Moody's - have awarded to IRFC "BBB-(Stable)","BBB-(Stable)" and "Baa3 (stable)" ratings respectively,which are at par with the sovereign rating for India. Besides,the Company obtained credit rating of "BBB+(Stable)" fromJapanese Credit Rating Agency in respect of its SamuraiBond issuance of March 2007. Each of the four credit ratingsis equivalent to India's sovereign rating, and is investmentgrade.Memorandum of Understanding with Ministry ofRailways, Government of India (MOU)Based on evaluation of its performance for the year 2008-09, the Company obtained 'Very Good' rating from theDepartment of Public Enterprises. The seemingly lowerlevel of performance as compared to that in severalprevious years when it had consistently obtained'Excellent' rating is mainly attributed to the fact that themethodology adopted by Department of PublicEnterprises for evaluation in respect of profitability itemsin the MoU was changed to the Company's disadvantagefrom the one adopted at the time of setting the targets.Significantly, the Company would have maintained'Excellent' rating if these parameters had been evaluatedbased on 'Profit After Current Tax' as done at the time offinalising the MoU, instead of 'Profit After Tax'. Despitethis apparently unfair though temporary setback causedby computational changes brought about, the Companyis committed to continuing all efforts to maintain highstandards of performance in future as well.The Company attaches high importance to suggestions madeby the Task Force appointed by the Department of PublicEnterprises each year to coordinate finalisation of MoU withthe Ministry of Railways. The Task Force has beenemphasizing for some years past the need for diversificationof business activities of IRFC in a measured manner. Whileparamount need for preserving the impeccable risk profileof the Company with a view to preventing adverse impacton cost structure of its debt has been adequately appreciated,11