Indian Railway Finance Corporation Limited was incorporated on December 12, 1986, as a Public Limited Company. Thereafter, The Company received a Certificate of Commencement of Business from the RoC on December 23, 1986. The MCA, through its notification dated October 8, 1993, classified the Company as a Public Financial Institution and subsequently, Company was registered with RBI to carry on the business of a non-banking financial institution, pursuant to a certificate of registration dated February 16, 1998. Dated March 17, 2008, RBI classified Company as a non-deposit accepting asset finance non-banking financial company. Thereafter, Company got reclassified as an NBFC-ND-IFC by RBI, through a fresh Certificate of Registration dated November 22, 2010.
Indian Railway Finance Corporation (IRFC) is a Schedule A' Public Sector Enterprise under the administrative control of the Ministry of Railways (MoR), Govt. of India. Since inception in 1986, IRFC has been mobilising funds from domestic and international markets for Indian Railways. The Company has made a huge contribution in the development and growth of Indian Railways and Railway entities including Rail Vikas Nigam Limited (RVNL) and IRCON. The President of India along with his nominees holds 100% of the equity share capital.
The Company's principal business is to borrow funds from the financial markets to finance the acquisition / creation of assets which are then leased out to the Indian Railways as finance lease. It is a dedicated market borrowing arm of the Indian Railways. Its primary business is financing the acquisition of rolling stock assets, which includes both powered and unpowered vehicles, for example locomotives, coaches, wagons, trucks, flats, electric multiple units, containers, cranes, trollies of all kinds and other items of rolling stock components as enumerated in the Standard Lease Agreement, leasing of railway infrastructure assets and national projects of the Government of India and lending to other entities under the Ministry of Railways, Government of India (MoR).
The MoR is responsible for the procurement of Rolling Stock Assets and for the improvement, expansion and maintenance of Project Assets. The Company is responsible for raising the finance necessary for such activities. Over the last three decades, the company has played a significant role in supporting the capacity enhancement of the Indian Railways by financing a proportion of its annual plan outlay. The Union Budget proposed a capital expenditure of Rs. 1,602 billion for the Indian Railways for Fiscal 2020, which was higher than the capital expenditure (revised estimate) of Rs. 1,388.58 billion in Fiscal 2019. The actual capital expenditure of the Indian Railways was Rs. 1,334 billion in Fiscal 2019. In Fiscal 2019, the company financed Rs. 525.35 billion accounting for 39.38% of the actual capital expenditure of the Indian Railways.
The Company follows a financial leasing model for financing the Rolling Stock Assets. The period of lease with respect to Rolling Stock Assets is typically 30 years comprising a primary period of 15 years followed by a secondary period of 15 years, unless otherwise revised by mutual consent. In terms of the leasing arrangements, the principal amount pertaining to the leased assets is effectively payable during the primary 15 years lease period, along with the weighted average cost of borrowing and a margin determined by the MOR in consultation with the company at the end of each Fiscal. Typically, the weighted average cost of borrowing factors in any expenses incurred by the company with respect to any foreign currency hedging costs and/ or losses (and gains, if any) as well as any hedging costs for interest rate fluctuations. For the second 15 year period, the company charges the Indian Railways a nominal rate which is subject to revision on mutually acceptable terms. The Company also follows a leasing model for Project Assets, which typically provides for lease periods of 30 years.
The total Capital Outlay (Capital Expenditure) of MoR for the year 2020-21 was Rs. 1,55,161 crore out of which IRFC's disbursement against the same was significant at Rs. 1,04,369.00 crore which constitutes 67.43% of total capital outlay for the year 2020-21. In development of additional terminals for handling rail cargos, a new 'Gati Shakti Multi-Modal Cargo Terminal (GCT)' policy was launched on 15 December, 2021.
As on 31st March 2023, 86.36% of the paid-up equity share capital of the Company comprising of 11,28,64,37,000 Equity Shares of Rs. 10/- each were held by President of India acting through administrative ministry i.e., Ministry of Railways (MoR). The balance 13.64% of paid-up equity share capital was held by public.