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

Asset quality profile favourableGiven that mosj of its lending Is to the MoR, IRFC continues to maintain a tow credit risk profile, as evidentfrom its nil non-performing assets (NPAs) as on March 31, 2012. Besides the MaR, tRFC also lends toRVNL, an SPV of the MoR that undertakes construction of new railway lines, bridges, and rail links to port'>IRFC's loans to RVNL Increased from Rs. 968 crore as on March 31, 2007 to Rs. 1,854 crore as on March31, 2012, and accounted for around 34% of IRFC's net worth as on March 31, 2012. However, ICR/\expects IRFC's credit risk profile to remain low owing to majority of lending to MoR and the supportiveMemorandum of Understanding between RVNL and MoR for the re-payment of RVNL's borrowings whicllIs likely to ensure timely re-payment by RVNL to IRFC. Any material change from such repaymentarrangement may entail a review of the assigned ratings.Capital structure likely to remain at prudent level as MOR likely to continuoinfusing capitalIRFC's gearing has been around 10 times (9.3 times as on Mar-12 and 8.9 times as on Mar-11) over lastfew years. Increasing business volumes (increase In lease disbursements to MoR) and low internal capitalgeneration due to high tax rate and dividend payouts has resulted in pressure on capital structure of thecorporation. However, to maintain its gearing levels below 10 times, IRFC has been receiving frequentcapital infusion from MoR (Rs. Rs.1,852 crore 1 over last four years, 2008-09 to 2011-12). Further, given largeborrowing programme in 2012-13, IRFC wilt need further equity infusion from MoR to keep Its gearing atmoderate lever; capital support from MoR has been forthcoming over last few years.In addition. as per Ministry of Finance (MoF) guidelines for Public Sector Entities (PSEs). IRFC is requiredto pay dividend equal to 20% of paid up capital or 20% of net profits, whichever is higher. Whlle during2011·12 IRFC paid dividend of Rs.100 crore (around 20% of PAT or 5% of IRFC's paid up capital) lowerthan the guidelines given IRFC's capital requirement for growth plans and as MaR' has infused capital overlast four years at par value (without any share premium). Going forward, though IRFC does not intend toIncrease dividend payment significantly from the current levels, but if it declares dividend in line with theMoF guidelines, its abfltty to generate capital from internal sources may be significantly impacted. But withthe regular capital Infusion from MoR, JRFC's gearing is not expected to increase from the current levels inthe medium term.Well-diversified borrowing mix a credit positiveHistorically IRFC has been able to raise funds at competitlve cost from domestic and international markets,Its borrowing profile improved further In recent years with access to tax free bonds- around half of freshborrowing of 2011-12 was raised through tax free bonds (interest rate lower by 100-200 bps than taxablebonds). IRFC was given approval to raise tax free bonds of Rs 10,000 crore in 2011·12 of which it raisedRs 7,000 crore in 2011·12. In 2012·13 Budget also IRFC got tax free bonds allocation of Rs. 10,000 croreand Its borrowing programme is Rs 15,000 crore hence sizeable part of current year's borrowings areexpected to met through tax free bonds which will help corporation to keep lower cost of funds.Additionally, IRFC has been raising funds through longer tenure instruments (up to 25 years, weightedaverage maturity of fresh borrowings raised in 2011-12 was around 11 years) which enable it to maintain acomfortable liquidity profile. Overall, IRFC's well-diversified borrowing profile is a credit positive and hashelped the corporation bring down Its cost of funds while keeping its asset-liability mismatches wl1hinmanageable limits.Liquidity profile of IRFC is determined by the tenure of Lease agreement (primary lease period of 15 yearsand weighted average repayment tenure around 9-10 years) against which IRFC borrows for similar tenureliabilities (on an average 8-12 years) which Is likely to result comfortable liquidity profile of IRFC. Further,as regard marginal tenure mismatch in Its assets and liabilities, JRFC has managed to maintain comfortableliquidity profile through principal recoveries from the earlier leases, internal accruals and raising short term:;:,:;(·; .. funds. ICRA expects the corporation to maintain comfortable liquidity profile going forward as well, on the· .'./); :: . ,, strength of its financial flexibility and its focus on increasing the tenure of its borrowings to match its asset·;;::·.;. ,i,>:·' : profile. Further, favorable lease agreement, as per which MOR can make advance lease rental payments'hould lRFC fall short of funds to service Its debt, is an additional liquidity support available to JRFC,. · \:t•;,;f\\;~ugh so far It has never resorted to the same.~~.3.\iot'.:il•".....______~ lnoiVd!Mg 1h01Herm loanslnal.~J[t~ ..•. hart application money of Rs 250 crore as on Mar-12 for which shares were allotted in 2012·13. 'l,-::.·.. ---····. ··~'\)i,