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

Credit Strengths.. Strong ownership arising from being a wholly owned subsidiary of the Ministry of Railways (MoR),Governme'nt of India (GO I)... Strategically Jmportant role as sole arranger of lease finance for MoR results in assured businessvolumes for IRFC... Diversified funding profile, strong financial flexibility and access to low cost subsidised funding sourcesenabling IRFC to maintain low cost of funding... Favourable asset quality, with entire exposures being to the MoR or related entities." Consistent track record of adequate core profitability; trend expected to continue as spreads areprotected by a favourable lease agreement between IRFC and MoR, which also protects IRFC'sbalance sheet against interest rate and currency risks, besides liquidity mismatches.Credit Challenges• Concentration risk significant as IRFC's business hinges on MoR's expansion plan and strategy... High dependence on MoR for capital infusion to fund its growth as well as to keep capital structure at aprudent level... IRFC's ability to maintain asset quality from relatively more risky project financing exposure to RVNL;the risk is mitigated on account of the loans being an indirect exposure to MoR.Rating Rationalelhe ratings factor In lRFC's sovereign ownership, its strategic importance for Ministry of Railways (MoR) as a sole arrangerof lease finance, its stable earnings supported by a favorable lease agreement with MoR and low credit risk profile. Therating also factors ln adequate capitalization and comfortable liquidity profile of the corporation. IRFC is expected to maintaina dominant share in the MoR's Increasing requirement for funding rolling stock on the strength of its ability to mobilize fundsat competitive rates driven by its quasi-sovereign franchise and access to subsidised funding avenue such as tax-freebonds. At the same time, ICRA expects the corporation to report stable earnings in future on the strength of a favorablelease agreement with MoR, which provides it with a positive interest spread and protects it against liquidity, interest rate andexchange rate related risks. Further ICRA has taken note of IRFC's increasing dependence on Ministry of Railway (MoR) forfresh capital infusion in order to maintain the gearing 3 below 10 times, given relatively low internal capital generation andsignificant Increase in business volumes over the years, though capital support from MoR has been forthcoming over theyears (MoR infused equity capital of Rs.1 ,852 crore 4 over last four years, 2008-og to 2011-12). ICRA has also taken note ofIRFC's exposure to Rail Vikas Nigam Limited (RVNL), a special purpose vehicle of the MoR, which undertakes theconstruction of new railway lines, bridges and port connectivity. Loans to RVNL have increased from Rs.968 crore as onMarch 31, 2007 to Rs.1,854 crore as on March 31, 2012 and constitute around 3% of fRFC's credit portfolio and around34% of IRFC's net worth as on March 31, 2012. ICRA expects IRFC's credit risk profile to remain low owing to majority oflending to MoR and the supportive Memorandum of Understanding between RVNL and MoR for the re-payment of RVNL'sborrowings which Is likely to ensure timely re-payment by RVNL to IRFC. The loans extended to RVNL could increase infuture and any material change from such repayment arrangement may entail a review of the assigned ratings.3Excluding short term debt4Including share application money of Rs 250 crore as on Mar-12 for which shares were allotted in 2012-13.