IRFC explores some Swiss franc swap to cut dollar risk
Chairman and Managing Director Manoj Kumar Dubey said that around 70 per cent of IRFC’s forex loans are in dollars and the 6 per cent fall of the Indian rupee against the US currency in the last 12 months has led the company to explore these steps. Mint.
“My Greek currency is almost $8 billion… Almost 30% of it is in yen and 70% is in dollars,” Dubey said in an interview.
“We are exploring whether part of the dollar book can be exchanged for Swiss francs because the cost there is much lower,” Dubey said. “If something comes along and the plans come to fruition, we’ll be looking at maybe around a $1 billion transformation.”
Borrowing costs
The cost of dollar-denominated borrowings is now touching 8%, he said, adding that the number was earlier around 7%, he said.
The company is in talks with bankers to convert some of its dollar book into alternative currencies or rupee-linked structures to reduce interest cost and exchange rate risk. However, he did not disclose the names of the banks and said that the talks were “at a very nascent stage”.
Dubey explained that the idea is not to eliminate foreign currency loans but to rebalance the debt mix so that the IRFC is less exposed to dollar-rupee volatility.
“We clearly do not want to be dependent on a single currency. The effort here is to diversify our foreign exchange risk so that sharp movements in the dollar do not hurt us,” the president said.
However, the outcome of such a decline in the foreign exchange mix may not necessarily be positive for the company.
“The choice of currency to reduce interest cost can have unforeseen consequences. In the past, INR has depreciated more against the Swiss franc than against the US dollar,” said Kuljit Singh, partner and national infrastructure leader at consultancy EY India. “There is also a general perception that the USD (dollar) may weaken in the future, which could create further unwelcome surprises in interest costs for Indian borrowers looking to switch currency.”
While IRFC is reviewing its liabilities and assets, it is also exploring refinancing of metro rail and rail-linked projects. “We also have a big plan to become a domestic option for all metro lines,” Dubey said.
Dubey, without sharing names, said that IRFC was working on a joint lending structure with multilateral organizations.
He said metro rail projects have so far relied mostly on multilateral organizations and foreign currency loans. “If a PPP (public-private partnerships) metro line is to be handed over to the state government, they either go to a bilateral institution or look for domestic (financing option). We want to say we are here. We are open to it (financing),” Dubey said.
The President said that since metro systems are not profitable, a state guarantee will be needed for this.
Relying on the rolling stock requirements and financing of projects of Indian Railways, its sole customer for nearly 40 years, IRFC has zero bad loans or non-performing assets (NPAs).
The financier is currently in a joint lending structure with multilateral institutions. “We will finance the rolling stock part… and multilateral companies will take care of the lower part,” he said.
The template for this strategy is Dedicated Freight Corridor Corp. of India Ltd (DFCCIL). “We did a major refinancing in almost a year ₹10,000 crore,” he said. DFCCIL saved money by replacing dollar loan with rupee loan from IRFC ₹2,700 crore over the loan period.
The drive to diversify
For decades, IRFC existed solely to finance Indian Railways. This changed after the government started directly financing rail capital expenditure. “(We) made zero payments to Indian Railways in FY24… there was almost no payment in FY25 as well.”
IRFC’s diversification drive began in FY25 when the company leveraged rail-linked projects across other public sector undertakings and then expanded into financing power generation (genco) projects with rail links.
It recently signed a memorandum of understanding with the Jawaharlal Nehru Port Authority. To finance the Vadhavan Port to be established outside Mumbai. IRFC’s customers include NTPC, Gaiil, among others.
IRFC expects its earnings to increase as it moves into non-rail project financing.
The company previously operated on a cost-plus model; It was earning 40 basis points on rolling stock and 35 basis points on project financing, effectively limiting its profitability. This meant that the company financed ₹1,000 crore rolling stock yields only 0.4% or ₹4 crore no matter how efficiently the project is carried out. “Now returns are much higher in the diversified book. We are ready to create a margin of 100-150 basis points here,” Dubey said.
Dubey said IRFC’s overall borrowing cost is 15-25 basis points lower than its peers.
The company’s loan repayment target is as follows: ₹30,000 crore for FY26 and the “next few years”, the President said. IRFC made payments in April-December, the first nine months of this financial year. ₹22,000 crore. Company’s assets under management (AUM) ₹Increased by ₹4.75 lakh crore at the end of December ₹15,000 crore in the December quarter alone.
