Indian Railways: Govt Eyes Partial Stake Sale In Indian Railway Finance Corp (IRFC) To Meet Its Divestment Targets

The Indian government is considering selling a portion of its stake in the state-owned Indian Railway Finance Corp (IRFC) in order to meet its divestment targets for the year, according to a MoneyControl report.

Currently, the government holds a majority ownership of over 86 percent in IRFC, which serves as the dedicated funding arm for Indian Railways.

IRFC raises funds from financial markets to finance the acquisition and creation of rolling stock and project assets. These assets are then leased out to Indian Railways through a finance lease agreement.

A government official stated that the stake sale will happen soon. The government has not yet determined the exact amount to be sold, but it plans to sell up to 11 per cent in multiple tranches.

In addition to other benefits, the sale would help the government meet the minimum public shareholding norms set by regulators, which require public companies to maintain at least 25 per cent public shareholding.

While state-run firms have more flexibility in this matter, the government aims to reduce its shareholding to comply with the norms.

IRFC, which is under the administrative control of the Ministry of Railways is a Schedule ‘A’ Public Sector Enterprise. It has played a crucial role in the expansion of the Indian Railways.

IRFC and RITES recently signed a Memorandum of Understanding (MoU) to enhance their cooperation in financing and developing railway infrastructure projects.

The deal aims to identify mutual areas of collaboration with IRFC’s to provide financial assistance to projects/ institutions that have backward and or forward linkages with the Railways.

In the current fiscal year, the government has so far raised Rs 56 billion — against the target of 510 billion.

In a similar move, the government recently sold over 5 per cent of its stake in Rail Vikas Nigam (RVNL), generating 13.66 billion rupees in revenue.