Statement of Assets and Liabilities for last Five Years and Latest ...

Given IRFC's modest accruals to net worth, CRISIL believes that Gol will continue toinfuse equity capital at regular intervals to enable IRFC to maintain adequate gearing,while meeting the growing funding requirements of IR, over the medium term.IRFC also has very strong asset quality, as it lends predominantly to IR, which is asovereign entity. Till date, IRFC has had zero non-performing assets (NPAs).Furthermore, IRFC is a public financial institution under Section 4A of the Con1paniesAct of 1956, and has been exempted from Reserve Bank of India's (RBI's) guidelines forsystemically important non-deposit taking non-banking financial companies (NBFC­ND-SI) regarding compliance with single/ group exposure norms to the extent that the-expesures-are--tewards-IR-fGef.()Adequate resource profileIRFC's ability to raise long-term funds at competitive rates is underpinned by its accessto a diversified pool of wholesale investors, including banks, mutual funds, pension andgratuity funds, insurance companies, as well as external commercial borrowings (ECBs).Its borrowing costs at around -8.2 per cent in 2011-12 (refers to financial year, April! toMarch 31) was similar to that in 2010-11, and compares well with that of its peers. IRFChas been permitted to raise funds through tax-free bonds which also support its resourceprofile.CRISIL believes that IRFC will maintain adequate resource profile driven by its strategicimportance, and access to a diverse source of long-term investors.The above-mentioned rating strengths are parHally offset by IRFC's followingweakness:Average earnings profileIRFC' s earnings profile is marked by moderate interest spreads and low operatingexpenses. As IRFC is the funding vehicle for IR, enhancing IRFC' s profitability is not theprimary objective. IRFC' s interest spreads ate preserved by ensuring a mark-up over itscosts of borrowings. Furthermore, the lease agreements with IR protect IRFC' s netinterest margins, and transfer the interest and foreign exchange risks on its borrowingsto IR. Consequently, IRFC' s net ptofitability marginl (NPM; on a yearly average basis)has remained stable at around 0.7 per cent over the past three yeats. However, the costplus model results in a lower NPM compared to other infrastructure financingcompanies.CRISIL believes that while IRFC' s earnings profile is not expected to improvesignificantly over the medium term, IR will ensure that the company remains profitableand generates adequate returns on its assets (RoA; 0.9 per cent'in 2011-12).1 NPM is defined as (Yield on funds deployed)- (Average borrowing costs)- (Operating expense ratio)+(Fee income levels)