The Centre has proposed to divest 2% equity in IRFC, with an additional 2% offered as a green shoe option. Under the OFS, more than 26.13 crore equity shares are set to be offloaded, with an option to sell another 26.13 crore shares in case of oversubscription.
The government will not exercise the oversubscription option for the ongoing IRFC OFS after the issue failed to get fully subscribed on the opening day. The issue, which opened for non-retail investors on Wednesday, was subscribed 95% (0.95 times) of the 2% stake accounting for 26.13 crore shares. Should retail investors participate?
Here’s what experts are saying
Ravi Singh, Chief Research Officer at Master Capital Services, said the OFS creates a near-term supply-side event. However, Singh emphasised that IRFC remains fundamentally strong, backed by quasi-sovereign credit quality, stable revenues and its critical role in financing railway infrastructure projects.
On whether investors should participate in the OFS or wait for clarity post the stake sale, Singh noted that timing and valuation are crucial. At present, IRFC trades at a discount to its historical multiples, though robust growth in its loan book and higher government capital outlay on railways have supported a premium valuation in recent periods.
Typically, OFS pricing comes at a discount to prevailing market levels, offering an entry opportunity. Conservative investors may prefer to wait for the OFS to conclude and for prices to stabilise. Investors comfortable with short-term fluctuations could consider subscribing during the OFS to capitalise on potentially lower prices. Overall, the stake sale is unlikely to alter IRFC’s long-term fundamentals but presents a tactical opportunity for investors to reassess their positioning, he added.
Santosh Meena, Head of Research at Swastika Investmart Ltd, said Indian Railway Finance Corporation remains a stable, monopoly-like entity as the dedicated financing arm for Indian Railways’ capex, essentially borrowing at low cost and lending to the railways. Its low-risk business model, backed by sovereign support, ensures consistent profitability and steady dividend payouts. Importantly, the proposed stake sale does not alter control, as the government will continue to hold a dominant majority post-OFS, leaving operations unaffected. He added that the OFS could marginally improve liquidity and free float, aiding better price discovery and potentially supporting index inclusion or upgrades over the long term.
IRFC Q3 snapshot
Last month, the company reported its highest-ever quarterly profit for the third consecutive quarter, supported by steady loan growth and improving margins. For the quarter ended December 2025, IRFC posted a profit after tax of Rs 1,802 crore, marking an 11% year-on-year (YoY) increase and the highest quarterly profit in the company’s history.
Net interest margins improved by over 8% YoY during the quarter, aided by value-accretive disbursements across diversified segments and disciplined liability management. Total income stood at Rs 6,719 crore for the quarter, while income for the nine-month period came in at Rs 20,009 crore.
Revenues in Q3 declined to Rs 6,661 crore, compared with Rs 6,763 crore a year ago. The company said the marginal YoY moderation in quarterly income was largely due to a one-year extension of a moratorium granted by the Ministry of Railways for a project lease agreement, which affected revenue recognition during the period.
The IRFC stock has been a big laggard, sliding 12% over a one-year period when Nifty has gained 11% in the same time. It is currently trading below its 50-day and 200-day simple moving averages (SMAs) of Rs 118 and Rs 126, respectively.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)