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IRFC 2022-23 Annual Report Analysis

Fri, 25 Aug

IRFC has announced its results for the year ended March 2023. Let us have a look at the detailed performance review of the company during the year 2022-23.

IRFC Income Statement Analysis

• Interest income during the year rose 17.7% on a year-on-year (YoY) basis.
• Interest expenses were up by 24.0% YoY during the same period.
• Operating expenses increased by 9.5% YoY during the year.
• The company's net interest income (NII) increased by 3.5% YoY during the fiscal. Consequently, net interest margins (NIM) witnessed a decline and stood at 86.7% in FY23 as against 466.2% in FY22.
• Other income increased by 1648.7% YoY during the year.
• Net profit for the year increased by 4.1% YoY.
• Net profit margins during the year declined to 26.5% in FY23 from 30.0% in FY22.

IRFC Income Statement – 2022-23

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Interest Income	Rs m	202,993	238,918	17.7%
Other Income	Rs m	23	408	1648.7%
Interest Expense	Rs m	140,748	174,472	24.0%
Net Interest Income	Rs m	62,245	64,446	3.5%
Operating Expense	Rs m	1,226	1,343	9.5%
Pre-provision Operating Profit	Rs m	61,042	63,511	4.0%
Provisions & Contingencies	Rs m	660	1,048	58.7%
Profit before tax	Rs m	60,902	63,370	4.1%
Tax	Rs m	3	0	-100.0%
Profit after tax	Rs m	60,898	63,370	4.1%
Minority Interest	Rs m	0	0	0.0%
Net Interest Margin	%	466.2	86.7
Net profit margin	%	30.0	26.5

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IRFC Balance Sheet Analysis

• The company's deposits during FY23 stood at Rs 0 m as compared to Rs 0 m in FY22, thereby witnessing an increase of 0.0%.
• Advances for the year stood at Rs 0 m as compared to Rs 0 m during FY22, a rise of 0.0%.
• Cost of deposits for IRFC rose 0.0% and stood at 0.0%, while yield on advances rose to 0.0%.
• The lender's investments rose to Rs 74.4 bn during the year from Rs 13.4 bn in FY22.
• Borrowing stood at Rs 0 m, a growth of 0.0% as compared to previous year.
• Overall, the total assets and liabilities for FY23 stood at Rs 4,911.5 bn as against Rs 4,499.9 bn during FY22, thereby witnessing a rise of 9.1%.

IRFC Balance Sheet – as on March 2023

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*	% Change
Networth	Rs m	409,963	454,703	10.9%
Advances	Rs m	0	0	0.0%
Deposits	Rs m	0	0	0.0%
Yield on advances	%	0.0	0.0
Cost of Deposits	%	0.0	0.0
Investments	Rs m	13,351	74,362	457.0%
Borrowings	Rs m	0	0	0.0%
Total Assets	Rs m	4,499,927	4,911,467	9.1%

Current Valuations for IRFC

• The trailing twelve-month earnings per share (EPS) of the company stands at Rs 4.8, an improvement from the EPS of Rs 4.7 recorded last year.
• The price to earnings (P/E) ratio, at the current price of Rs 48.5, stands at 5.8 times its trailing twelve months earnings.
• The price to adjusted book value (P/ABV) ratio at current price levels stands at 1.4 times, while the price to income ratio stands at 1.5 times.

Per Share Data/Valuations

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Income per share (Unadj.)	Rs	15.5	18.3
Earnings per share (Unadj.)	Rs	4.7	4.8
Diluted earnings per share	Rs	4.7	4.8
Avg P/E ratio	Rs	5.1	5.8
Avg P/ABV ratio	Rs	0.7	1.4
Avg Market Cap	Rs	308,417	368,532
Dividends per share (Unadj.)	Rs	1.40	1.50

Ratio Analysis for IRFC

• Efficiency Ratios

  Credit/Deposit Ratio: The company's credit/deposit ratio improved and stood at 0.0x during FY23, from 0.0x during FY22. The credit/deposit ratio tells us how much money a company has raised in the form of deposits and has deployed as loans.

  Debt to Equity Ratio: The company's debt to equity ratio increased and stood at 0.00x during FY23, from 0.00x during FY22. The debt to equity ratio of a company tells us how much debt a company uses relative to its equity.

• Liquidity Ratios

  Capital Adequacy Ratio (CAR): IRFC's capital adequacy ratio (CAR) was at 512.0% as on 31 March 2023 as compared to 439.7% a year ago. This ratio helps measure the financial strength of the company or any finance company to meet their obligations using their assets and capital.

  A company that has a good CAR has enough capital to absorb potential losses. Thus, it has less risk of becoming insolvent and losing depositor's money.

  Provision Coverage Ratio (PCR): Apart from CAR, you also need to take a look at the company's PCR and LCR ratios. Provisioning coverage ratio (PCR) is the percentage of funds that a company sets aside for covering losses due to bad debts.

  So a high PCR ratio means asset quality issues are under control and the company is not vulnerable.

  Liquidity Coverage Ratio (LCR): The LCR is designed to ensure that companies hold a sufficient reserve of high-quality liquid assets to allow them to survive a period of significant liquidity stress lasting 30 calendar days.

• Profitability Ratios

  Return on Equity (ROE): The return on equity (ROE) ratio for the company deteriorated and stood at 13.9% during FY23, from 14.9% during FY22. The ROE measures the ability of a firm to generate profits from its shareholders capital in the company.

  Return on Assets (ROA): The return on asset (ROA) ratio of the company deteriorated and stood at 1.29% during FY23, from 1.35% during FY22. The ROA measures how efficiently the company uses its assets to generate earnings.

  Return on Capital Employed (ROCE): The ROCE for the company improved and stood at 5.32% during FY23, from 5.12% during FY22. The ROCE measures the ability of a company to generate profits from its total capital (shareholder capital plus debt capital) employed in the company.

• NPA Ratios

  Gross NPA Ratio: The gross NPA ratio is the ratio of a company's gross NPAs to gross advances. IRFC's gross NPA ratio stood at 0.0% as of 31 March 2023 compared to 0.0% in the same period a year ago.

  A high gross NPA ratio is a bad thing as it indicates how much of a company's loans are in danger of not being repaid.

  Net NPA Ratio: In simple language, net NPAs are simply the total non-performing assets minus the provision left aside. It gives you the exact value of NPAs after the company has made provisions.

  The net NPA ratio of IRFC was 0.0% in financial year 2023. This compared with 0.0% a year ago.

Key Ratio Analysis

No. of Mths Year Ending		12 Mar-22*	12 Mar-23*
Credit/Deposit Ratio	x	0.0	0.0
Debt to Equity Ratio	x	0.0	0.0
Loans / Deposits	x	0.0	0.0
Capital Adequacy Ratio	%	439.7	512.0
Return on Equity	%	14.9	13.9
Return on Assets	%	1.4	1.3
Return on Capital Employed	%	5.1	5.3
% of Gross NPAs	%	0.0	0.0
% of Net NPAs	%	0.0	0.0
Yield on Advances	x	0.0	0.0
Yield on Investments	x	0.0	0.0

To see how IRFC has performed over the last 5 years, please visit here.

IRFC Share Price Performance

Over the last one year, IRFC share price has moved up from Rs 21.2 to Rs 48.5, registering a gain of Rs 27.4 or around 129.3%.

Overall, the S&P BSE SENSEX is up 9.9% over the year.

(To know more, you can check out historical annual results for IRFC here and quarterly results for IRFC here)