This proposal of 5.25 lakh crore capex plan for railways is apart from the railway budgetary allocation of Rs 2.6 lakh crore for 2023-24.
(1) Is this narrative the reason market is giving a thumbs up to all railway stocks including IRFC??
well, this may be partially true. But there may be other reasons too, i guess !
(2) Business is monopoly in nature ,enough cash generating machines
(3) A year back , these stocks were languishing at very low level at very low p/e ratio …even now 8-10 P/E ratio is not very high to lose money when compared with high P/E Market in general. And most PSU companies have clean balance sheet-! Mr market seems to have realised this
(4) The Govt has realised that the only way to get rural vote is to generate employment opportunity for the rural mass which could be through huge capex, Make in India theme such as defence etc which in turn would also propel economic growth – Govt in turn also get revenues out of dividend and divestment in these PSU through OFS (once stock price goes up) .win- win situation for the govt and the country in general
(5) As regards to IRFC , the business is unique in nature.
Indian Railway Finance Corp borrows funds from the financial markets to finance the acquisition/creation of assets which are then leased out to the Indian Railways to mainly RVNL IRCON or any other entity under the Ministry of Railways. These are long term lease of 30-40 years and at the end of the lease period , the railways buys our the asset at written down value. Railway is not likely to default on interest payment.
Last week, state-owned RITES inked a memorandum of understanding (MoU) with IRFC to explore avenues of mutual collaboration in the railway eco-system and the transport infrastructure sector.
As part of the MoU, RITES will offer consultancy & advisory services and assist in ascertaining the financial & technical viability of projects, while IRFC will provide financial services to projects/ institutions that have got backward and or forward linkages with the Railways.
Discl: IRFC forms a part of my basket of Railway stocks created a year back for long term horizon of 3-5 years
… It is not buy or sell recommendation. Please do your own assessment before investing.
PSU stocks carry risk of frequent change govt policy. If there is a change in Govt , the entire capex story may not continue.
PSU stocks quarterly performance may or may not be consistent “qoq”or even “yoy”
| Subscribe To Our Free Newsletter |
