State-run Indian Railway Finance Corp Ltd (IRFC) market capitalisation crossed Rs 1 lakh crore on September 11 as the stock climbed to a new high, doubling in value this year. The company is now the 10th most valuable state-run enterprise in the country, surpassing Bharat Electronics Ltd, Bank of Baroda, and Gail India Ltd.
The stock hit an all-time high of Rs 84.50 on BSE, up 8 percent from its previous close, as the government's infrastructure push and expansion of the rail network boost investor confidence.
State Bank of India is India's most valued state-run firm with a mcap of Rs 5.21 lakh crore followed by Life Insurance Corp at Rs 4.27 lakh crore and NTPC Rs 2.33 lakh crore. At number four is ONGC Ltd followed by Power Grid Corp Ltd, Coal India Ltd, Hindustan Aeronautics Ltd, SBI Life Insurance Co Ltd and Indian Oil Corp Ltd.
Not just IRFC, other railway stocks too have jumped since the start of 2023. Railtel Corp of India advanced nearly 87 percent, IRCON International Ltd 140 percent, Rail Vikas Nigam 148 percent, Titagarh Rail System 270 percent and Texmaco Rail & Engineering Ltd 180 percent.
Railways on fast-track
Recently, the cabinet approved seven multi-tracking projects worth Rs 3,25,000 crore, expanding the Indian Railways' network by 2,339 km across 34 districts in nine states.
During the recently concluded G-20 summit, India, the US, the UAE, and Saudi Arabia announced a plan to establish shipping and railway connections linking Europe and the Middle East to India.
The aim is to build an economic corridor connecting Middle Eastern nations via railways, which will then link to India through maritime routes. The European Union will also participate in this initiative.
These developments boosted confidence in railway stocks, with investors seeing railways as a long-term growth opportunity, analysts said.
IRFC, which provides financial services, raises money from through bonds and off-shore borrowings to finance the plan outlays of railways and other developmental programmes.
Analysts, too, are positive about the sector's due to improved revenue visibility, growth certainty, and a robust business model. Growth may, however, slow down in the near term, especially in fiscal 2024, due to limited new orders and completion of existing orders.
Despite a lack of new orders in the June quarter, the railway firms achieved strong operating margins due to a decrease in input costs.
Many railway companies have seen a moderation in revenue growth in the current fiscal year, along with a decline in the order book in Q1FY24 compared to Q4FY23.
The sector, however, is eyeing orders from metro, high-speed train, and other projects, which are expected to remain prominent and provide support in the coming months, analysts added.
Vijay Kedia in a recent interview to Moneycontrol said that the rally in the railway and defence stocks was at the early stages of take-off. These stocks were poised for a good run owing to increasing government capex towards the railways and defence sector.
“One year ago, only a few people had predicted this story to play out well. However, today it is out in the open,” Kedia said. The ace said new investors would want to latch on to these stocks and not let go. Thus, the prices would continue to rise.
Earlier, 16 state-run firms achieved a milestone of crossing Rs 1 lakh crore mcap, which included LIC, SBI, ONGC, Coal India, MMTC, NTPC, NMDC, Indian Oil Corp, SAIL and BPCL.
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