Business5 Reason Behind IRFC's Rapid Rise in Stock Price

5 Reason Behind IRFC’s Rapid Rise in Stock Price

What is your take on the buzz surrounding the Indian Railway Finance Corporation (IRFC) these days?In fact, IRFC has seen its stock price increase exceedingly well for the last five years, resulting in an impressive return of 598.59%.

You are not alone in questioning why this stock has exploded; it has certainly caught the attention of investors and traders alike who seek to know what happened.

Let’s consider some of the possible factors that may have contributed to this meteoric rise and find out why IRFC stands out among others in this area.

Why is the IRFC Share Price Rising?

The IRFC share price is around Rs. 175. Here are the main reasons why the stock is on the rise, and there is a sharp increase in the IRFC Share price chart.

  • Strong Financials

In Q4 FY24, the net profit of the IRFC rose to ₹17,173.21 million, which is 33.61% higher than the Q4 FY23 net profit of ₹12,852.41 million.

Overall, the net profit of the company in FY24 rose to ₹64,121.04 million at 3.97% YoY (year-on-year) growth. Also, the revenue from operations in Q4 FY24 reached ₹64,731.16 million with a YoY growth of 4.51%.

This rapid growth seen in the company’s financial performance shows how stable it is and also how much it can grow in future, making it attractive to investors, leading to an increase in its share price.

  • Dividend Announcements

In November 2023, the company announced the interim dividend of ₹0.80 per equity share on the face value of ₹10 each. For FY24, the company’s board has put forward the final dividend of ₹0.70 per equity share.

This means that in FY24, it declared a total dividend of ₹1.50 per share. This is a signal that the company is not just earning profits but is also distributing it to the shareholders.

If you also want to encash such opportunities, then you can buy the stocks on the Dhan Online Trading App. Such dividend announcements make the stock attractive to income-seeking investors. Regular dividends indicate a company’s financial health and its commitment to returning value to shareholders.

  • Fund Raising

For FY25, the company’s board has given the nod to raise a maximum of ₹50,000 crores from the domestic and international markets.

Tax-free bonds, taxable bonds, capital gains bonds, ESG bonds, etc., will be included in this funding program. This is a sign that the company is raising funds to grow its business.

By raising substantial amounts through different bond offerings, IRFC can fund large projects and investments. This capital raising move is a proactive one and reveals that the company wants to grow its operations as well as enhance services.

  • Growth in Assets Under Management

The AUM of this company stands at ₹4,66,036.21 crores as of Q3 FY24. The compound annual growth rate in AUM between FY19 and Q3 FY24 remained strong at 21.75%.

The credit risk of the overall AUM is quite low because 98.94% of AUM is exposed to the Ministry of Railways as of Q3 FY24. Hence, the chance of failing the business is next to impossible.

Having high assets under management (AUM) alongside a low credit risk profile signals a prudent financial strategy as well as a low-risk investment orientation at IRFC. Additionally, they are closely related to the Ministry Of Railways, thus ensuring stability and safety in their investments.

  • Strong Linkages

IRFC has a diversified portfolio and can fund any company related to Indian Railways through backward or forward linkages. This reduces the overall risk in business and opens the doors for more opportunities.

This includes leasing of rolling stock, state joint venture-related railway infrastructure, dedicated freight lines, multi-modal logistics parks, high-speed corridors, and renewable energy projects for the railway network.

IRFC’s ability to finance a broad range of projects related to railways is crucial in expanding and modernizing India’s railway infrastructure. With such an approach to diversification, risks are not only spread but also many growth avenues tapped into as it guarantees continuous demand for its financial services.

Conclusion

The rise in the price of IRFC’s stock has been remarkable due to enhanced financial performance, well-timed dividend declarations towards strategy execution, aggressive fundraising plans, strong growth in AUM, and strong linkages with the Indian Railways network.

This shows how IRFC as a company has managed to overcome challenges and grow strategically while maintaining investor trust. As the business continues expanding further into its areas of strength, it makes an excellent opportunity for any investor who wants to be part of its ongoing prosperity.

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