IRFC Chairman and MD Manoj Kumar Dubey said the company plans to increase its share of overseas borrowing while continuing strong domestic fundraising. With expanding investments in metro, ports and logistics projects, IRFC’s net interest margins are rising and expected to keep improving as the portfolio shifts beyond its traditional rail financing. Despite the stock declining more than 23% over the past year, the company expects strong disbursements and higher profitability going forward.
By Alpha Desk December 4, 2025, 1:20:13 PM IST (Published)
Indian Railway Finance Corporation (IRFC) has stepped back into the external commercial borrowings (ECB) market after more than three years, raising the yen equivalent of $300 million from Sumitomo Mitsui Banking Corporation. Chairman and Managing Director Manoj Kumar Dubey said this marks the beginning of a broader strategy to diversify funding and improve profitability.
Dubey explained the rationale behind choosing yen borrowing at a time when interest rates in Japan may rise. “Once the rates go high in that side, the hedging cost comes down,” he said, calling the structure a “very good opportunity” for diversifying the lender’s funding base. The borrowing, with a five to ten-year tenure, is expected to have an all-in cost of 6% to 6.2%, which he views as commercially attractive compared to domestic funding.
IRFC plans to continue tapping the overseas debt market and is preparing another bid on December 8 for $400 million worth of dollar-yen borrowings. Dubey said the ideal mix for the company would be 25% to 30% of borrowing from ECBs, around 50% from domestic bonds, and 20% to 25% from bank loans. “We cannot put all eggs in one basket,” he said. The company also raised around ₹3,000 crore through zero-coupon bonds at a 6.8% rate, lower than prevailing domestic yields.
Funding is expected to keep pace with strong business expansion. Dubey reaffirmed guidance to disburse more than ₹30,000 crore this year and said IRFC has already signed agreements worth over ₹50,000 crore against its sanction target of ₹60,000 crore. “We believe that by quarter three we will be overshooting the target that we gave ourselves for sanction of the estimates,” he said.
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IRFC is rapidly expanding beyond its historic role as a cost-plus financier to Indian Railways. It is now deploying capital into metro rail, ports, logistics and multi-modal transport projects within the government ecosystem. Dubey said this shift is driving the company’s margin improvement, calling it the “sweet spot” for growth. New loans are being written at margins of 100 to 150 basis points, much higher than the roughly 40-basis-point margin in the legacy portfolio.
The improvement is visible in net interest margins (NIM). NIM on the new book is above 2%, compared with 1.4% earlier. Consolidated NIM has risen to 1.5% and is projected to reach 1.6% to 1.65% by the end of the year. Dubey expects the trend to continue as the share of diversified assets rises. “Overall NIM will be showing a very steep increase going forward… for many, many quarters,” he said.
IRFC’s current market capitalisation stands at ₹1,50,418.50 crore. The stock has declined more than 23% over the past year, but the management is banking on broader market participation and improved returns as its new lending mix scales up.
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