Indian Railway Finance Corporation Ltd Management Discussions

1. Indian Economic Overview

Amidst a volatile global economic landscape, the Indian economy demonstrated relatively strong performance. In FY 2025, it retained its position as one of the worlds fastest-growing economies, recording a GDP growth rate of 6.5%. This growth was driven by robust sectoral performance such as financial services, strong private consumption, and proactive government policies. Timely interventions by the Indian Government played a pivotal role in improving the overall business environment.

During the reported year, 26 Navratna Central Public Sector Enterprises (CPSEs) were operational, reflecting a supportive environment for key public enterprises. Additionally,

11,11,111 Crore was allocated for capital expenditure in the Union Budget 2024–25, underscoring the Governments continued focus on infrastructure development. This included a provision of 1.5 lakh Crore in long-term, interest-free loans to promote infrastructure investment by state governments.

Major initiatives encompassed the expansion of highways and expressways, along with railway electrification projects.

Aiming to become a $30 trillion economy by 2047, the Indian Government is actively transforming the countrys logistics ecosystem through a reimagined infrastructure strategy, focused on creating a smart and interconnected logistics network.

Looking ahead, India is expected to continue its strong growth trajectory. By 2025, India has already become the fourth-largest economy globally, with the potential to rise to third place—surpassing Germany—by 2028. This forecasted growth is likely to be supported by rising consumption, driven by declining inflation and tax incentives introduced in the Union Budget 2025 26.

2. Outlook

India is expected to emerge as the third-largest economy by the end of this decade. The countrys growth will be driven by its unprecedented infrastructure expansion, policies directed to emerge as the factory of the world, increasing incomes and growing aspirations. Also, a Viksit Bharat will have enhanced connectivity as is evidenced in the governments efforts towards building a road network and expanding rail and air networks at a record pace. While the economic outlook for India remains broadly positive, there are certain challenges that need to be addressed. Inflationary pressures, driven by global supply chain disruptions and rising commodity prices, have been a cause for concern. However, the governments proactive measures, such as maintaining a watchful eye on food prices and implementing targeted interventions, are expected to help mitigate these risks.

Additionally, the global economic uncertainties arising from geopolitical tensions and tightening monetary policies in major economies pose potential risks to Indias export performance. However, a diversified export basket and a growing integration into global value chains, is expected to provide a cushion to the domestic economy against these external shocks.

Overall, the Indian economy is well-positioned to sustain its growth momentum in the coming years. The combination of robust domestic demand, a conducive policy environment, and the ongoing structural reforms is expected to drive economic growth, attract investments, and create employment opportunities. However, continued vigilance and proactive policy measures will be crucial in addressing emerging challenges and ensuring that the benefits of economic growth are shared equally across all sections of society.

3. Industry Scenario

Indian Railways (IR), one of the worlds largest rail networks, is the lifeline of the nation, connecting its vast and diverse landscapes. It plays a crucial role in the nations economy by facilitating the movement of passengers and freight across the country.

Indian Railways is committed to become a world class transportation provider, driving progress and contributing to lndias all-round development.

IR is working hard to upgrade its infrastructure, introduce new technologies and further strengthen its role in the nations growth story.

The FY 2024-25 stands as a significant milestone in Indian Railways journey towards realizing the ambitious goals of Viksit Bharat 2047. The unwavering commitment to modernization, efficiency enhancement, technological adoption and sustainability has not only redefined the rail travel experience but has also strengthened the Railways position as a vital engine for national progress. By seamlessly integrating tradition with cutting-edge innovation, IR is firmly on track to becoming a world-class transportation network, catering to the evolving needs of a dynamic nation and contributing significantly to its overall development.

Sustainability and green energy remained at the core of Indian Railways modernization strategy. With rapid progress in electrification and the adoption of Head-on-Generation (HOG) technology, Indian Railways is minimizing diesel consumption and reducing its carbon footprint. The development of the Eastern and Western Dedicated Freight Corridors, the integration of renewable energy sources, improved waste management practices, and the piloting of hydrogen-fuelled trains further highlight IRs firm commitment to eco-friendly transportation. These initiatives are key to realising Indian Railways vision of becoming a net-zero carbon emitter. The modernization of passenger coaches over Indian Railways coaches involves upgrading both the technological prowess and uplifting the passenger experience. The improved design of trains with enhanced safety features, better ride index, passenger amenities like improved aesthetics, improved ambient lighting, CCTVs, passenger information systems provide a wholesome experience to the on-board passengers.

Indian Railways has achieved significant milestones by introducing fully non-AC Amrit Bharat trains, Vande Bharat trains and Namo Bharat trains for catering to diverse passenger needs.

Indian Railways, as we all are aware, has the worlds fourth largest route-km, the highest passenger km and carries the third largest tonne-km freight. But, its not just about the numbers that potray Indian Railways as one of the core modes of transport, but it is also the prime mover of the logistics sector of India.

Indian Railways achieved a record freight loading of 1617.4

MT in FY 2024-25 with a revenue of 2.64 lakh Crore. The key focus areas for 2025-26 budget are safety, capacity augmentation, customer amenities and rolling stock upgradation. The key initiatives, such as the Amrit Bharat station scheme, modernization of locomotives and coaching stock and the implementation of advanced safety measures, are crucial steps towards achieving the world class standards. Indian Railways has taken a paradigm shift with introduction of Vande Bharat trains with over 136 services currently running, newly launched Namo Bharat, Amrit Bharat and soon to be launched Vande Sleeper variant. The travel experience of passengers has tremendously improved with their ergonomic design, multiple passenger friendly features and enhancing safety as well as riding comfort. What is pertinent to mention is that Indian Railways has ensured that it remains committed towards transportation needs of every Indian in every level socio-economic strata. Almost two-third of all coaches are Sleeper and General coaches catering to demand for movement across the country. Several new Amrit Bharat trains are on the anvil in the FY 2025-26.

In the quest to Viksit Bharat 2047, Indian Railways continued its transformative- journey in this financial year also, paving the way for a new era of modernization and progress. With a strong focus on providing world class travel experience, boosting freight efficiency and also adopting advanced technologies, the Indian Railways has solidified its role as a catalyst for national growth with a record freight loading of

1,617.4 MT. The best ever capex utilization of 2.62 lakh Crore was achieved in FY 2024-25 which is leading to development of modern stations, state-of-the-art trains and innovative safety systems are reshaping the landscape of rail travel.

4. Company Overview

Indian Railway Finance Corporation (IRFC) was set up on

12th December 1986 as the dedicated funding arm of the

Indian Railways for mobilizing funds from domestic as well as overseas Capital Markets. IRFC is a Navratna and Schedule ‘A Public Sector Enterprise under the administrative control of the Ministry of Railways, Govt. of India. It is also registered as Systemically Important Non-Deposit taking Non-Banking Financial Company (NBFC - ND-SI) and Infrastructure Finance Company (NBFC- IFC) with Reserve Bank of India (RBI).

IRFC has played a significant role in its more than 38 years of existence in supporting the expansion of the Indian Railways and related entities by financing a significant proportion of its annual plan outlay.

The main objective of the company is to meet the predominant portion of ‘Extra Budgetary Resources (EBR) requirement of the Indian Railways through market borrowings at the most competitive rates and terms. The Companys principal business therefore is to borrow funds from the financial markets to finance the acquisition / creation of assets which are then leased out to the Indian Railways. IRFCs constant endeavour has been to diversify its borrowing portfolio in terms of instruments, markets and investors which has led to the Company meeting the targeted borrowings year after year, through issue of both taxable and tax- free bonds, term loan from banks/financial institutions besides offshore borrowings, at competitive market rate. Its aim is to be one of the leading Financial Service Companies in the country, for raising funds from the capital market at competitive cost for Railway infrastructure augmentation, duly ensuring that the Corporation makes optimum profits from its operations.

5. Operational Highlights

The Board of Directors had approved borrowing limit of

50,000 Crores for FY 2024-25 for meeting the funding requirement of Indian Railways, if any, new business activities, refinancing of existing loans and for other general corporate purposes. For leasing of Project Assets, there is an initial Moratorium period of 5 years and MoR is not required to pay the lease rent in moratorium period. Further, during the moratorium period company recognises on annual basis the finance cost as disbursement which gets added to the AUM of the company.

• To MoR: During the FY 2024-25, no disbursement was made to MoR due to ‘NIL target allocation for the year.

• To Other than MoR:

Disbursed 31.27 Crore to NTPC under Finance

Lease for Bogie Open Bottom Rapid (BOBR) rakes under General-Purpose Wagon Investment Scheme (GPWIS) of MoR to NTPC. This was the companys maiden project under its business diversification plan outside MoR.

Disbursed 700 Crore to NTPC Renewable

Energy Limited which is having Power Purchase Arrangement (PPA) signed with MoR for supply of green energy.

During the year, the company raised:

Taxable Bonds: 27,240 Crore (Previous year Taxable Bonds: 22,940 Crore)

Rupee Term Loans: 3,500.00 Crore (Previous year: 5,980 Crore)

54EC Bonds: 1,877.30 Crore (Previous year: 2,064.34 Crore)

The company had also prepaid high cost long term loan of

29,200.00 Crore. from lower rate borrowings. The average cost of incremental medium & long-term borrowing during the year was 7.07% p.a. payable semi-annually.

Revenue from operations of the Company has increased by

503.51 Crores from 26,648.63 Crores in 2023- 24 to 27,152.14 Crores in 2024-25, showing a growth of 1.89 %. Profit before Tax (PBT) of your Company for the year ended 31st March 2025 was 6,502.00 Crores as compared to 6,412.11 Crores for the previous year, registering a growth of 1.40 %. Company had elected to exercise the option permitted under section 115 BAA of the Indian Income Tax Act, 1961 as introduced by the Taxation Laws (Amendment) ordinance, 2019 dated 20th September 2019. Pursuant to exercise of such option of Section 115 BAA, the taxable income under normal assessment is NIL. Further, after adoption of Section

115 BAA, the Company is outside the scope and applicability of Minimum Alternate Tax (MAT) provision under section 115 JB of Income Tax Act. Accordingly, no provision has been made in the accounts for the FY 2021-22, FY 2022-23, FY 2023-24 and 2024-25 as well. Profit After Tax for the year ending 31^st March 2025 was 6,502.00 Crores as compared to 6,412.11 Crores for the previous year, registering a growth of 1.40 %.

Earnings Per Share (EPS) for the financial year ended March

31, 2025, was 4.98 per share of face value of 10/- each, as against EPS of 4.91 per share in the previous financial year. Net worth of the Company as on March 31, 2025 stands at 52,667.77 Crore

( H in Crore)

The details of key financial ratios applicable and specific to the Company are given below:

6. Human Resources

At IRFC, we uphold a strong value system and adhere to best human resource (HR) practices to enhance capabilities and achieve our organizational objectives.

As of 31^st March 2025, the total manpower of the Company stood at 45. To strengthen the existing workforce, the Company inducted two Executives and one Executive on deputation during the financial year 2024–25. Women comprised 20% of the total workforce as on 31^st March 2025. Effective grievance redressal processes are also structured to keep the trust, respect and confidence of our team intact. Company has put in place effective Human Resource acquisition and maintenance function, which is benchmarked with best corporate practices to meet the organizational need. Company implements all directives and guidelines with regard to reservation policy issued by Govt. of India. Liaison Officer has been appointed to look into the matter of reservations and also the welfare and safeguard of SCs/STs/OBCs/ PwBD/ EWS employees. Liaison Officer also ensures that there is no discrimination on the basis of Cast, Religion and disabilities amongst the employees. IRFC being a Lean Organization has adopted "Open Door Policy" and every employee has been given sufficient opportunity to meet and discuss his/ her problem or grievance with the Management. SC/ST constituted 20% of its total workforce as on 31^st March, 2025.

In order to enhance the skills, capabilities and knowledge of employees, a well-defined Training and Development Policy for below board level executives and non-executives is in place. Employee training and development is an essential element of the Companys strategy. During the year 2024-25, the Company imparted training to 45 of its employees to various training programmes and workshops including inhouse trainings. Companys Board of Directors consist of professionals with vast experience and high level of expertise in their respective field and industry. It will be endeavour of the Company that the whole time Directors and Non-Executive Directors attend training programmes in order to keep themselves abreast with the latest development in the area of finance, accounts etc.

During the FY 2024-25 Non-Executive Directors have been imparted training for 24 Hrs. cumulatively. IRFC is an equal opportunity employer. Company provides equal growth opportunities for the women in line with Govt. of India philosophy on the subject. Being a lean organization, where Company has 45 employees, women representation has gone across hierarchical levels. Women constituted 20% of its total workforce as on 31^st March, 2025. As per Govt. of India directives and guidelines from time-to-time, IRFC ensures the welfare of women employees.

7. Risk Management

Effective risk management is central to ensuring sound financial health and operational resilience of the Company. In this regard, the Company has put in place a Board-approved Comprehensive Risk Management Policy that covers various types of risks including Liquidity Risk, Credit Risk, IT & Operational Risk, and Foreign Exchange Risk, in line with regulatory expectations and best industry practices.

In compliance with the Reserve Bank of India (RBI) guidelines, the Company has constituted a Risk Management Committee (RMC) comprising the Chairman & Managing Director, Director (Finance), and two Independent Directors. The Company has also appointed a Chief Risk Officer (CRO) to oversee the implementation and effectiveness of the risk management framework.

As per the approved policy, the Company has constituted the following sub-committees under the RMC for focused oversight and mitigation of specific risk areas:

1) Asset Liability Management Committee (ALCO):

Responsible for monitoring and managing liquidity and market risks. ALCO oversees mismatches in the asset-liability profile and ensures adequate liquidity for operations.

2) Forex Risk Management Committee:

Established to monitor and mitigate risks arising from foreign exchange fluctuations and interest rate variations associated with External Commercial Borrowings (ECBs).

3) IT & Operational Risk Management Committee:

Focuses on identifying and mitigating operational and IT-related risks in the functioning of the Corporation. The minutes of the meetings of these sub-committees, along with action taken reports, are placed before the Risk Management Committee. The proceedings of the RMC meetings are further placed before the Board of Directors for their review and oversight.

Given the Companys core function of financing rolling stock and infrastructure assets for the Ministry of Railways (MoR) under a leasing model, the credit risk is minimal. Additionally, loans extended to entities such as Rail Vikas Nigam Limited

(RVNL) and IRCON International Limited are either backed by assured cash flows from MoR or repayment guarantees, thereby adequately ringfencing these exposures.

As per the lease agreements with MoR, interest rate risk is largely passed through to the MoR, resulting in a low-interest rate risk exposure for the Company. Furthermore, the predictable nature of the Companys cash inflows offers significant insulation from liquidity risk.

Although the foreign exchange risk on overseas borrowings is also contractually passed through to the MoR, the Company continues to adopt prudent, efficient, and cost-effective risk mitigation strategies to manage such exposures effectively.

The Company is continuously striving to enhance its Risk Management Framework in line with evolving regulatory requirements and best industry practices. Efforts are underway to further strengthen data-driven risk assessment capabilities, integrate advanced risk analytics, and improve early warning systems. Emphasis is also being placed on enhancing cyber risk resilience, refining stress testing mechanisms, and aligning risk appetite frameworks with strategic objectives to ensure proactive and forward-looking risk management.

8. Internal control systems and their adequacy

The Company has in place adequate internal control systems commensurate with the nature and volume of its business to ensure statutory and regulatory compliances. The Company has in place Accounts Manual, Manual for Procurement of Goods, Services and Works and HR Manual. The Company has also implemented a policy for temporary placement of surplus funds with the Banks in order to strengthen its cash management system.

In line with the RBI notification dated Feb 3, 2021, Risk

Based Internal Audit (RBIA) policy has been formulated and approved by the Board of Directors. The scope of RBIA is well defined and is very exhaustive to take care of all functions and business of the Company depending upon the risk assessment and control environment. Based on RBIA report, efforts are made to further strengthen the existing systems and procedures. The significant observations are discussed in the Audit Committee Meetings regularly. IRFC has developed Comprehensive Risk Management Policy, Credit Policy, Information Technology Policy and Information Security Policy.

The Statutory Auditors of the Company are appointed by Comptroller and Auditor General (C&AG) of India, and the appointment is rotated periodically. Besides, the accounts of the Company are subject to supplementary audit by the office of C&AG, as required under the Companies Act. The C&AG also conducts propriety audit of the Company.

Besides, as mandated under Companies Act, 2013, the

Statutory Auditors have certified as part of their Audit Report, the effectiveness of Internal Financial Control over financial reporting.

9. Management Outlook

The outlook for IRFC in FY 2024-25 is centred around strengthening its robust business model and fostering a strong relationship with the Ministry of Railways (MoR).

Assets Under Management stood 4.60 lakh Crores at the end of March 2025. To strengthen the business model, IRFC is taking steps towards business diversification. The company is actively exploring for funding projects linked to Railways. IRFCs mandate allows it to provide financial assistance to entities and projects with forward and backward linkages with Railways.

In this regard, company is exploring opportunities for investments in railway infrastructure projects such as Dedicated freight lines, High-speed rail corridors, Multi-modal logistics parks, non-conventional energy sources for the railway network, etc.

Company is taking several strategic steps to diversify its lending portfolio. During the FY 2024-25, company started funding for projects other than MoR under its mandate of financing for activities with forward and backward linkages for the railways.

Also, during the year under review Company: -

Has been Declared the lowest bidder to finance

3,167Crore loan for Patratu Vidyut Utpadan Nigam

Limited (PVUNL), a subsidiary of NTPC to finance the development of the Banhardih Coal Block in Jharkhand for coal transportation through Indian Railways.

Signed MoU with REMC Limited (JV of Indian Railways and RITES to procure economical conventional/ Renewable power for Railways) for collaborating to explore financing options for the Renewable Energy (RE) projects to be awarded by REMC Limited for supply of RE to Indian Railways as well as for collaborating for financing Thermal/Nuclear /Renewable power projects set up under captive model through a JV between IR and other entities.

Entered into an agreement for financing of 20 Bogie Open Bottom Rapid (BOBR) rakes under General-Purpose Wagon Investment Scheme (GPWIS) of MoR to NTPC for an amount up to H700 Crore under Finance Lease

Entered into a Rupee Term Loan of H5000 Crore agreement with NTPC Renewable Energy Limited (NTPC REL), a wholly owned subsidiary of NTPC Green Energy Limited (NTPC GEL) and disbursed INR 700 Crores during the FY.

In line with Indias focus on infrastructure spending to reach its target GDP of USD 5 trillion by FY25 and to meet the goal of making India "Viksit Bharat by 2047, IRFC is committed to raising funds from the financial market at the most competitive rates and terms. The governments National Infrastructure Pipeline (NIP) and PM Gatishakti initiative lay the groundwork for comprehensive and integrated infrastructure development in the country. IRFC, as a premier financial institution with a track record of NIL NPA and capability to mobilize large funds from both domestic and offshore markets can play a significant role in supporting Indias infrastructure sector, driving economic development and growth.