Indian Railway Finance Corporation Ltd

Financial Year 2022-23 has been another turbulent year with the global economy marred by unprecedented uncertainty. The global economic growth has moderated amidst the prolonged Russia- Ukraine war, even though the effect of the pandemic has receded. Food and energy price shocks affected the general prices, with wage price spiral leading to elevated inflation across countries. The recent failures of few banks in the United States are a reminder of the challenges posed by the interaction between tighter monetary and financial conditions and the buildup in vulnerabilities. Even though the financial sector remained under tremendous stress due to pandemic situation and volatility in the market arising from global macro issues Indian economy was stable, and the Company continued to exhibit excellent performance which was primarily attributed to its strategic relationship with MOR, strong financials and its dedicated workforce.

Despite concerns about an impending global recession, India's economy has reaffirmed its position as one of the world's fastest growing major economies. Amid several headwinds such as high inflation, escalating commodity prices and disruptions in global trade due to ongoing geopolitical conflicts in Europe, the economy is projected to have clocked a growth rate of 7.2% during FY23. The Government and the Reserve Bank of India (RBI) have implemented several measures to address these headwinds and recent decline in commodity prices suggest that these efforts have started to bear fruit in terms of reining in inflation.

India has emerged as the third-largest economy in terms of purchasing power parity.

In the Union Budget for FY24, the Government announced capex worth ? 10 lakh crores, which marked a substantial increase of 37.40% compared to the previous year. This underscores the Government's focus on ramping up infrastructure development, which acts as a tailwind to drive long-term economic growth. The Indian Railways received the highest ever capital outlay of ? 2.40 lakh crores, which is further expected to bolster India's regional connectivity.

Well-capitalised public sector banks in India have improved their financial health, which has put them in a better position to boost credit supply. Despite a slowdown in global economic activity, India's performance indicators do not reflect this trend, resulting in a sense of cautious optimism.

Indian Railways (IR) with its 4th largest network in the world, has been the backbone of the transportation sector in India, carrying millions of passengers and cargo from one part of the country to the other. Indian Railways has definitely consolidated the roots of growth in the post pandemic scenario and now the path has been set for moving ahead with positive momentum. IR is moving forward with a vision to become a more efficient system, to be able to keep pace with the growth and compliment the economic development of the nation.

Indian Railways with its more than 170 years of existence, is now making transformative changes. The vision of Indian Railways is to provide safe, efficient, affordable, customer focused and environmentally sustainable integrated transportation solution(s) to the country.

Indian Railways achieved its highest ever freight loading of 1512.07 MT in 2022- 23 as compared to 1418.1 MT in 2021- 22. There is a 6.63% increase in freight loading over FY 2021-22. Freight loading is the dominant source of revenue for IR and incremental loading has been continuously achieved in recent years. The freight earnings have increased by 16% compared to the same period in the previous year.

Indian Railways are now poised to take transformational leap in the Amrit Kaal of the post-Independence period and fulfill the vision of 'Viksit Bharat' which includes Modern, faster, available on demand passenger services and facilities, a substantial share in freight cargo with ancillary services in logistics parks and domestic industry driven rail infrastructure of highest standards. A record capex target of RS. 2.60 lakh crores in 2023-24 is targeted to initiate the necessary changes for this vision, across the entire network. Achieving India's commitment of net zero carbon by 2070 will rest in part on more rail-bound passenger and cargo movement.

The Indian Railways has set ambitious targets to contribute approximately 1.5% to the country's GDP by developing infrastructure that can support 45% of the modal freight share of the economy.

We have consistently exhibited robust financial performance on the back of raising funds at competitive rates. This has helped us keep our cost of borrowings low. Strategic relationship with the Ministry of Railways enables us to maintain a low risk profile. The FY2022-23 has been another year of strong financials. Revenue from operations of Company has increased by RS. 3,593 crores from RS. 20,298.27 crores in 2021-22 to RS. 23,891.27 crores in 2022-23, showing a growth of 17.70%. Profit before Tax (PBT) of Company for the year ended 31st March 2023 was RS. 6,337.01 crores as compared to RS. 6,090.15 crores for the previous year, registering a growth of 4.05%.

Total disbursement for FY 2022-23 was RS. 32,392.63 Crores comprising of RS. 17,000 Crores for funding of Rolling Stock, H15,392.63 Crores for financing of Railway Projects under EBR- IF.

Borrowings during the year include Taxable Bonds worth RS. 21,558.70 crores (Previous year 19,847.90 crores), Rupee Term Loans of RS. 22,274.46 crores (previous year RS. 42,900 Crores) and 54EC bonds of RS. 1,729.61 crores (previous year RS. 1,161.01 crores).

Company had received approval of Ministry of Finance for issue of 54EC Capital Gain Bonds in October 2017, since then, Company is making all endeavors to increase its market share in 54EC Bond market. In 2022-23, Company mobilized around RS. 1,729.61 crores througRs. 54EC Bond as against RS. 1,161.01 crores in 2021-22, registering a growth of 48.97%.

The weighted average cost of the pool of borrowings made by Company during the year 2022-23 for rolling stock worked out to 7.51 % p.a (semi-annual) as against 6.62% (semi-Annual) during the previous year 2021-22 and WACC for project assets under EBR-IF worked out to 7.52% for FY 2022-23 as against 6.43% (semiAnnual) during the previous year 202122. During the year under review RBI has hiked Repo rate from 4% to 6.50%.

Company has not made any provision for tax in its books pursuant to its decision to exercise the option of lower tax rate permitted u/s 115BAA of the Income Tax Act, 1961, as introduced by the Taxation Laws (Amendment) Ordinance, 2019 dated 20th September, 2019. The Company's taxable income was nil and it did not have to pay Minimum Alternate Tax (MAT) with reference to its Book Profit. MAT payable u/s 115 JB was outside the ambit of the Section 115 BAA. Thus, on adoption of Section 115 BAA of the Income Tax Act, 1961, the Company was outside the scope and applicability of MAT provisions and there was a zero-tax liability in the financial year 2022-23.

During the FY 2022-23, Company had declared the Interim Dividend @ 8% i.e., RS. 0. 80/- per equity share having face value of RS. 10/- each and has also recommended a Final Dividend for the FY 2022-23 @ 7%

1. e., RS. 0.70/- per equity share, which is subject to approval of the shareholders at the ensuing Annual General Meeting. Thus, the total dividend for the financial year 2022-23 would amount to RS. 1.50/- per equity share of RS. 10/- each.

Company considers good corporate governance practices a sine qua non for sustainable business that aims at generating long term value for its shareholders and all other stakeholders. Accordingly, it has been laying increasing emphasis upon development of best corporate governance practices amongst Central Public Sector Enterprises (CPSEs). Pursuant to the DPE Guidelines on Corporate Governance, quarterly compliance report is being submitted to the Ministry of Railways, through DPE, within the stipulated time. Further, the Report containing Annual Score (consolidated score of four quarters) was also submitted to DPE within the prescribed timeline.

During the financial year 2022-23, the Company in accordance with the provisions of section 135 of the Companies Act, 2013 & rules made thereunder was required to spend RS. 91.31 crores, being 2% of its average net profits for the last three financial years. The Company has approved a total of 16 projects with a total outlay of RS. 59.00 crores and out of the remaining balance RS. 30.31 crores was disbursed to PM CARES Fund, RS. 1.00 crore to Swachh Bharat Kosh and RS. 1.00 crore to Clean Ganga Fund. Whereas the amount allocated towards 16 projects amounting to RS. 59.00 crores would be disbursed on receipt of bills/claims from the implementing agencies in future and the same amount has been transferred to the ‘CSR Unspent Account' maintained with Scheduled Bank in terms of section 135(6) of the Companies Act, 2013. The Company is committed to promoting Health and Nutrition as the theme for focused intervention as mandated by Department of Public Enterprises for the Financial Year 2023-24.

Board has authorized the Company to borrow funds amounting to RS. 50,000 Crores during FY 2023-24 for meeting the funding requirement of Indian Railways, if any, new business activities, refinancing of existing loans and for other general corporate purposes. For the FY 202324, the Company is looking forward for diversification of lending portfolio and fund projects with forward or backward linkage (s) with Railways.

With India's transforming railway landscape and evolving infrastructure,

I consider ourselves to be fortunate that Company is well positioned to seize the emerging opportunities. Further, I am confident that Company will be able to achieve strategic goals while delivering sustained and compelling results in the future.

I express my gratitude to customers, shareholders, suppliers, employees, lending institutions, stakeholders and the Government of India for reposing their confidence and trust in the Company. The Company looks forward to their continued support for sustaining its excellent performance levels.

Regards,

Chairman and Managing Director

(Addl. Charge) & Director (Finance)

DIN:07935630