why irfc share is increasing?
The shares of the Indian Railway Finance Corporation (IRFC) traded for more than its Initial Public Offering (IPO) issue price of Rs 26. The share price surged by 6.69% or Rs 1.75 before closing at Rs 27.90 apiece today.
The IPO of IRFC, a financing arm of the Indian Railways, opened for subscription last year from January 18 to January 20. The price band of the IPO ranged between Rs 25 and Rs 26 per share.
IRFC functions under the ministry of railways (MoR) and its business is to borrow funds from the financial markets to finance the acquisition or creation of assets. These assets are then leased out to the Indian Railways.
IRFC recorded a growth of Rs 37.90 per cent in its profit after tax (PAT) at Rs 6,090 crore in 2021-22. In the preceding fiscal, the company posted its PAT at Rs 4,416 crore, according to a statement by IRFC.
Meanwhile, the revenue of IRFC from operations for 2021-22 saw a growth of 28.71 per cent and was recorded to be Rs 20,298.27 crore. The revenue was Rs 15,770.22 crore in the previous year. The revenue from operations for the fourth quarter of 2021-22 was Rs 5,931.12 after it grew by 16.39 per cent from Rs 5,095.81 in the third quarter.
The net worth of IRFC is Rs 41,000 crore in FY22 and the funding cost was recorded to be 6.42 per cent, according to Moneycontrol.
“The company continues to raise funds at the most competitive rates and terms, both from the domestic and overseas financial markets, which has helped to keep the cost of borrowings low," an IRFC statement read.
Indian share markets are roaring at all-time high levels today.
The Midcap and SmallCap indices are catching up with the ongoing bullish momentum.
In the Midcap and SmallCap space, sector specific momentum is where the money is right now.
The public sector units (PSU) are currently the best-performing sector. The rally started with PSU Banks and the fire is spreading to other PSUs.
I recently wrote about why PSU stocks are rising and what lies ahead.
But now...it's time for railway stocks.
Stocks involved in the railway segment have been the talk of the town for the last few weeks.
In the previous month, a few railway stocks witnessed a staggering rally of over 50% while others are still only delivered marginal gains.
Co-head of Research at Equitymaster and my colleague Rahul Shah recently explained why railway stocks are going up.
Here's an excerpt from his editorial...
You can read the entire editorial here.
In the performance table above, Rail Vilas Nigam (RVNL) leads the table with 97% in one month and 148% in the last six months.
The leader of the sector, Indian Railway Catering and Tourism Corporation (IRCTC) has been quiet in terms of stock price performance.
The question now remains whether the rally will continue in railway stocks?
Unlike other sectorial indices, we don't have Railway Index to analyse the trend and predict its momentum.
So we created the Marketcap Weighted Railway Index (MWRI) to analyse the trend.
Considering the marketcap of each stock, the weights are assigned to create the index.
With a marketcap of Rs 580 bn, IRCTC leads the weightage with 42% followed by IRFC with a marketcap of Rs 450 bn, weighing 33%.
On the daily chart above, the Marketcap Weighted Railway Index (MWRI) is trending bullish since the low of June 2022.
After the death cross in May 2022, the index was trending bearish, in sync with the market sentiments.
With the reversal in the benchmark indices, railway stocks also witnessed a reversal, in sync with broader market.
The golden cross - a bullish crossover of the short-term moving average (50 days) over the long-term moving average (200 days) - is visible on the chart, confirming the reversal.
It highlights the current rally is just the beginning of a new trend in railway stocks.
With the golden cross bullish pattern, the breakout and the re-test of the consolidation is visible on the chart.
After the rally, between July 2022 to September 2022, the index took a breather and broke out in the start of November.
The breakout, re-test, and resumption in the bullish trend, indicates the bulls have the upper hand.
As Rail Vikas Nigam Ltd (RVNL) leads the performance table, does it still have room to go higher?
Let's analyse the price chart of RVNL.
The stock broke out of the accumulation zone in the form of a horizontal trendline at Rs 26 and headed to Rs 40.
The re-accumulation phase, from the start of 2021 to November 2022, paid off for patient investors as the stock has delivered multibagger returns.
Bulls are grabbing the opportunity at the breakout as volumes in the lower panel signal participation in the rally.
The higher volume on the breakout is a sign of a bullish scenario.
Indian Railway Finance Corporation Ltd has been an underperformer since its listing in January 2021 at Rs 25-26.
Patient investors who got allotment in the IPO will be happy now as the stock is trading at Rs 34.
The stock broke out of the consolidation as per the Fibonacci Time Cycle theory of 89 weeks.
Such was the case with IRCTC too in June 2021 when it was trading at Rs 400. The stock went to touch a high of Rs 1,273.
Can IRFC repeat the IRCTC rally? Only time will tell.
Similar to the RVNL and IRFC, Rites share price broke out of the consolidation zone with higher volumes.
The consolidation of around 30 months and the breakout with volumes is likely to last longer and the rally may prolong towards the higher levels.
This is yet another stock from the basket witnessing a rally, consolidation, and breakout, leading the way northwards.
The uptick in volumes across the railway stocks highlights the eagerness of investors to accumulate these stocks and grab this opportunity.
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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...
"PSU stocks are looking good, given their dividend and order book size. For RVNL, debt and cash in hand are almost at the same levels. However, in the case of IRCON, the stock is looking more attractive at the current level with around Rs 4,000 crore of cash from a market cap size of more than Rs 6,000 crore," AK Prabhakar, Head of Capital, IDBI Capital.
On Sunday, it was reported that Indian Railways would begin the production of 120 advanced Vande Bharat Express trains by August 2023. This may be one more probable reason for today's sharp rise in some of the railway counters.
"At least 120 advanced Vande Bharat trains will be manufactured at Marathwada Railway coach factory in Latur, and efforts are on to begin production by August," news agency PTI reported quoting Union minister Raosaheb Danve. The tendering process for coach manufacturing is in the final stages and the contract would be finalised soon, the report also mentioned.
The contract process is underway with a consortium of Russia and India's RVNL and the actual coach production is expected to start by August, it added.
Also Watch: HDFC Bank vs ICICI Bank: Which stock to buy after Q4 Results
On the technical front, RVNL was also seen trading higher than the 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 80.69. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 12.49. It has a price-to-book (P/B) value of 2.62. The scrip has climbed 28.81 per cent so far in 2023 and 153.37 per cent in the past one year.
IRCON was last seen trading higher than the 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day RSI came at 79.65. The company's stock has a P/E ratio of 8.18. It has a P/B value of 1.22. The counter has gained 14.04 per cent on a year-to-date (YTD) basis and 59.60 per cent in a year.
For IRFC, the stock was last seen trading higher than the 5-day, 20-, 50- and 200-day moving averages but lower than 100-day moving averages. The counter's 14-day RSI came at 65.60. The company's stock has a P/E ratio of 5.64. It has a P/B value of 0.84. The counter has slipped 10.82 per cent so far this year but has gained 31.87 per cent in a year.
