The Indian government is considering selling some of its stake in the state-owned Indian Railway Finance Corp (IRFC) (INID.NS) as it aims to meet its divestment targets for the year, two government officials told Reuters on Wednesday.
Financing India’s Railway Expansion and Modernization
IRFC (Indian Railway Finance Corporation) is a subsidiary of the Indian Railways, established in 1986. It serves as a financial entity that focuses on raising funds for the expansion and development of the national railway network and related infrastructure projects. IRFC is vital for financing the acquisition of rolling stock and investments in rail infrastructure, such as track development and electrification.
It gathers funds through bonds and loans from both domestic and international markets, which are then provided to the Indian Railways for its investment needs. The role of IRFC contributes to modernizing and improving the overall transportation infrastructure and connectivity of India’s railways.
The government owns a little over 86% of the Indian Railways’ funding arm.
“The stake sale would take place soon,” a government official said, adding that while the government is yet to decide the exact quantum of sale, it will aim to sell up to 11% in multiple tranches.
Government’s Stake Sale Strategy and Compliance with Shareholding Norms
Last month, the government sold a more-than-5% stake in another state-run railways company, Rail Vikas Nigam, raising 13.66 billion rupees ($164.34 million).
So far in fiscal 2024, it has raised 56 billion rupees against a target of 510 billion rupees.
The Ministry of Finance did not immediately respond to a Reuters request for comment.
The sale would also have the added advantage of the government adhering to the regulator-mandated minimum public shareholding norms, which requires that public companies maintain at least 25% public shareholding.
While state-run firms have greater leeway in this regard, the government intends to bring down its shareholding in line with the norms.
Shares of IRFC have gained 58% over the last four weeks. The stock was trading at 51.55 rupees per share at 01.42 p.m. IST on Wednesday, up 1%.
($1 = 83.1202 Indian rupees)
