The Indian Railway Finance Corporation (IRFC) has announced its Q2 FY25 results, showcasing a steady financial performance. Despite challenges, IRFC reported a 2% rise in revenue, a 4% increase in profit, and declared an interim dividend of ₹0.8 per share, adding a stable outlook for investors. Here’s a closer look at the key numbers and what they could mean for shareholders.
IRFC financial highlights
| Financial Metric | Q2 FY25 | Q2 FY24 | % Change (YoY) |
| Revenue | ₹6,899.3 crore | ₹6,761.0 crore | 2% |
| Net Profit (PAT) | ₹1,612.6 crore | ₹1,544.6 crore | 4% |
| Net Interest Income (NII) | ₹1,650.6 crore | ₹1,579.5 crore | 4.50% |
| Dividend per Share | ₹0.8 | — | — |
Revenue and profit growth
In the second quarter of FY25, IRFC’s revenue rose to ₹6,899.3 crore, marking a 2% increase from the same period last year. This growth was complemented by a 4% rise in net profit, which reached ₹1,612.6 crore. The revenue increase is attributed to stable lending activities, although the rise was modest compared to previous quarters.
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Key revenue drivers
- Interest Income Growth: IRFC’s core revenue component, the net interest income (NII), saw a 4.5% increase, amounting to ₹1,650.6 crore.
- Dip in Other Income: Other income sources fell by approximately 26% year-over-year, highlighting IRFC’s dependence on interest-driven revenue.
Dividend declared
IRFC has declared an interim dividend of ₹0.8 per share. The record date is set for November 12, 2024. For dividend-focused investors, this payout reflects IRFC’s commitment to return a portion of its profits to shareholders, even as it continues to finance infrastructure projects for the Indian Railways.
IRFC Share price reaction and performance
Following the results, IRFC’s share price dipped by 3% to settle around ₹153.3, a correction from its peak of ₹229 in July. However, the stock has still managed to deliver impressive gains over the year, climbing over 50% on a year-to-date (YTD) basis and 113% over the past year.
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Market sentiment and performance metrics
- Price-to-Earnings (P/E) Ratio: At 32.01, indicating a relatively high valuation in line with strong earnings growth potential.
- Price-to-Book (P/B) Ratio: A 4.2 P/B ratio, reflecting a high valuation in relation to the company’s assets.
- Return on Equity (RoE): Currently at 13.1%, signifying efficient profit generation on shareholder investments.
IRFC’s balance sheet health
| Balance Sheet Metric | Q2 FY25 | Q2 FY24 |
| Net Worth | ₹51,464.1 crore | ₹46,883.2 crore |
| Debt-to-Equity Ratio | 7.83 | 8.67 |
Debt and capital structure
IRFC operates on a high debt-to-equity ratio model, with the latest quarter showing an improvement in the ratio, which decreased from 8.67 to 7.83. This reflects IRFC’s efforts to maintain a balanced capital structure while continuing to fund large-scale rail projects.
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Challenges and risks
- Expense Growth: IRFC’s total expenses rose marginally by 1%, reaching ₹5,287.6 crore in Q2 FY25. Controlling operational costs remains crucial for profit sustainability.
- Market Volatility: A correction in IRFC’s stock price, along with a 20% drop over the last three months, reflects cautious market sentiment. Investors might be factoring in potential risk or valuation limits at current levels.
What this means for investors
For investors, IRFC’s latest results underline a consistent performance and commitment to dividends, making it attractive to those seeking stable returns. However, the stock’s recent correction may signal an upcoming period of volatility. Those invested in IRFC should consider both the positive dividend return and the impact of external factors on stock price movements.
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Conclusion
IRFC’s Q2 FY25 results underscore its role as a steady, growth-focused PSU supporting Indian Railways. With a moderate revenue and profit rise, alongside a solid dividend payout, IRFC continues to be a valuable pick for dividend-seeking investors. However, monitoring expense growth and market sentiment will be crucial for future investment decisions.
