Fitch Ratings has affirmed Indian Railway Finance Corporation Limited’s (IRFC) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB-‘, with a ‘Stable’ Outlook.
IRFC’s ratings are linked to the ratings of India (BBB-/Stable) due to IRFC’s legal and funding ties with the Ministry of Railways (MoR). Fitch has classified IRFC as a credit linked entity. The company’s strategy is dictated by the government of India, which tightly monitors and controls it. IRFC plays an important strategic role in India’s railway sector because it is the sole financing arm of the MoR.
The ratings derive strength from the MoR’s ongoing support, which is evident from the regular equity injections into IRFC since its formation.
Under a lease agreement between IRFC and the MoR, the ministry will cover any financial shortfalls by making advance payments for leases if IRFC does not have sufficient resources to redeem maturing bonds and/or repay loans. Fitch expects that future standard lease agreements will continue to contain a similar assurance, and that the MoR will provide funding to prevent liquidity mismatches that could lead to an IRFC default.
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