REVEALED! Why IRFC share price opened 3 pct northward today

IRFC Share Price Today: Responding to the strong December 2020 quarter numbers of the Indian Railway Finance Corporation (IRFC) Limited, the IRFC share price today opened 3 per cent higher from its Friday close. According to stock market experts, IRFC management announced Rs 1.05 dividend also played its role in attracting investors who want more than what Fixed Deposit (FD) are offering.

Speaking on the combination of strong IRFC quarterly results and Rs 1.05 dividend announced yesterday; Avinash Gorakshkar, Head of Research at Profitmart Securities said, "Strong quarterly results announced by the company has definitely played a major role in this huge rise in the IRFC share price rise. However, a big role of Rs 1.05 dividend per IRFC shares can't be negated."

Gorakshkar said that IRFC share can't be a Multibagger share to buy but it's for sure that it will announce dividends next year too. People are expecting around Rs 1.50 dividend per IRFC share next year, which is huge if we compare it with the current fixed deposit returns. He said that due to the continuous dividend and monopoly in its business as it finances Indian Railways and currently the Government of India (GoI) has already announced capital investment to the tune of Rs 90,000 crore in the Indian Railways in the recent union budget. This augurs well for IRFC business prospects and hence these factors together have worked in favour of this recent spike in the IRFC share price.

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Indian Railway Finance Corporation Limited or IRFC — the dedicated market borrowing arm of the Indian Railways — posted profit growth of 15.65 per cent to Rs 2,934 Crore for the nine months ended 31st December, 2020 from Rs 2,537 Crore for the corresponding nine months in the previous year. The total revenue from operation grew by 10.76 per cent on YoY basis for the same period to stand at Rs 11,315.51 crore. The Board of Directors of IRFC has declared an interim dividend of Rs 1,380 crore translating to Rs1.05 per share for the financial year 2020-21, on a face value of Rs 10 per equity share.

The annual disbursement for IRFC grew more than tenfold to Indian Railways, from Rs 11,000 crore in FY 2014-15 to Rs 1.13 lakh crore mandated for the FY 2020-21. The Assets Under Management (AUM) is set to cross Rs 3.75 trillion at the end of the current fiscal, registering a Compounded Annual Growth Rate (CAGR) of around 30 per cent over the last five years.

The Company has been able to raise funds at the most competitive rates and terms both from the domestic and overseas financial markets which has helped to keep its cost of borrowing low. The Company’s papers command a premium of at least 20 to 30 bps in the domestic financial market and 50 to 60 bps in the overseas financial markets as compared to its peers.

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