Govt Plans To Offload Stakes In Indian Railway Finance Corp To Meet Divestment Target: Report

As of now, the government owns over 86 per cent of Indian Railway Finance Corp. The report noted that it aims to sell up to 11 per cent of its stake in multiple tranches

The Centre is deliberating over diluting some of its stake in the Indian Railway Finance Corp (IRFC), the financing arm of the Indian Railways, to meet this year's divestment targets. Last month, the government divested a 5.36 per cent stake in another railway PSU, Rail Vikas Nigam Limited (RVNL). A Reuters report on Wednesday citing two government officials said that the IRFC sale would take place soon, however, the government is yet to decide the exact quantum of the sale. 

The report also noted that the government aims to sell up to 11 per cent of its stake in multiple tranches. As of now, it owns over 86 per cent of Indian Railway Finance Corp. 

Additionally, the sale would help the government meet the minimum public shareholding requirements set by market regulators, which requires that publicly traded companies must maintain a minimum of 25 per cent public shareholding. Although PSUs have some flexibility in this matter, the news agency said that the government aims to align its shareholding with these regulations.

Over the past four weeks, IRFC shares have surged by 58 per cent, the report noted. As of 01.42 p.m. IST on Wednesday, the stock was trading at 51.55 rupees per share, marking a 1 per cent increase.

In July, the government divested over 5 per cent of Rail Vikas Nigam shares generating Rs 1,366 crore rupees ($16.43 million). In the current fiscal year 2024, the government has garnered only Rs 5.6 lakh crore against a divestment target of Rs 51 lakh crore.

As per its website, the Indian Railway Finance Corporation (IRFC), established in 1986, is the financing arm of Indian Railways, facilitating funds from domestic and overseas markets. IRFC’s cumulative funding to the rail sector has crossed Rs 5.04 lakh crore as of March 31 2022. 

Earlier this month, IRFC reported a 6.3 per cent year-on-year fall in its net profit for the first quarter ended June (Q1 FY24) to Rs 1,556.6 crore. The company's total revenue from operations climbed 18.7 per cent on year to Rs 6,679.2 crores in Q1 FY24 from Rs 5,627.4 crore in Q1 FY23. Total income rose to Rs 6,681.0 crore in the first quarter.