What is the future of RailTel and IRFC over the next 10years?

RailTel Corporation is a PSU is one of the largest Pan-India optic fiber network along Railway track. It has total monopoly on the projects while being agnostic in the marketplace. It has a strategic relationship with the Indian Railways for providing critical connectivity services.

RailTel Logo

It has lead implementation of various mission-mode projects for the Government of India including rolling out the National Knowledge Network, Bharat Net (formerly, the National Optical Fiber Network) and USOF funded optical fiber based connectivity project in North East India

Let’s now about the other PSU — IRFC

Indian Railway Finance Corporation (IRFC) is a dedicated financing arm of the Indian Railways that is focused on meeting the ‘Extra Budgetary Resources’ (EBR) requirement of the Indian Railways through instruments, markets and investors using both taxable and tax-free bonds, term loan from banks/financial institutions, off shore borrowings, at competitive market rate.It is registered with the RBI as a financial entity.

IRFC Logo

The borrowed funds are used to finance the acquisition/creation of assets which are then leased out to the Indian Railways.

After knowing a few things about the company under discussion, let us look at the stock performance since listing for:

RailTel Stock

RailTel Stock Performance to date

IRFC Stock

IRFC Stock Performance to date

We can see that both these stocks have given negative returns in capital appreciation but have provided healthy dividends.

Now, coming to the question

Is it a good idea to hold the stock for 10years?

One important thing to note here is that RailTel and IRFC through their association with Indian Railways is dependent on the undertaken infrastructure development.

Capital Intensive Development

Owing to this, the gestation window for generating healthy returns as compared to sectors like IT, FMCG, Banks, etc.

Let us look into some other reasons why holding it can be beneficial

  1. Dividends
  2. Focus of the government on
    1. Tourism
    2. Dedicated Freight Corridor(Goods Movement within the country along with road and inland waterways)
    3. Logistics (to support farmers & businesses)
    4. Operational Efficiency of the Indian Railways (Improvement in value creation for every rupee spent)
    5. Internet Connectivity (through programs for meeting economic and strategic goals)
    6. Railway Infrastructure
      1. Through Electrification
      2. Upgraded Stations
Freight Transportation by Railways
Dedicated Freight Corridor

As India moves towards becoming the US $5Trillion Economy, the value accretion from infrastructure linked stocks will gain tremendously in value.

Hope this helps

You can follow my blog or Facebook page on investing for getting insight into other stocks.

Happy Investing!!

References:

  1. https://www.railtelindia.com/profile/about-us.html
  2. https://irfc.co.in/
  3. Western Railways’ Mumbai Division runs 100th Textile Express
  4. Economic Survey 2022: Indian Railways To Emerge As ‘An Engine Of National Growth’
  5. Indian Railways electrification: Three zones 100% electrified. Details here
  6. https://www.msn.com/en-in/news/other/indian-railways-to-add-350-km-to-400-km-of-dedicated-freight-corridor-by-march-says-rail-minister-piyush-goyal/ar-BB1cXaIa
  7. Rail Budget 2022 | Modernisation, new Vande Bharat trains and more: Indian Railway gets over Rs 1,40,000 crore
  8. Budget may peg railways’ operating ratio under 96%

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