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Fitch Ratings has reaffirmed the long-term foreign currency issuer default rating of Indian Railway Finance Corporation (IRFC) at 'BBB-' with a stable outlook, highlighting the company's strong legal and financial connections to the Government of India. The rating is in line with India's sovereign rating, evidencing IRFC's pivotal role in financing India's extensive railway network.
Rating Reaffirmed at 'BBB-'; Outlook Stable:
Fitch reaffirmed IRFC's 'BBB-' rating with a stable outlook, linking it directly to the sovereign rating of India, considering IRFC's close legal and funding relationship with the Ministry of Railways. The agency opined that IRFC's ratings are "credit linked" to the government, considering its strategic role in public infrastructure development in India.
Strategic Significance:
IRFC is the focused market borrowing arm of Indian Railways, charged with raising funds to finance the modernization and expansion of the country's rail network. Its activities are a key part of the government's infrastructure push, especially as public investment remains a key driver of economic growth.
Strong Sovereign Support:
The rating captures the high likelihood of extraordinary support by the government, if needed, due to IRFC being owned by the government and playing an essential role in railway financing.
India's Economic Fundamentals:
Fitch pointed to India's strong medium-term growth prospects, with GDP expected to expand 7.2% in FY25 and 6.5% in FY26. The agency said that public sector investment in infrastructure, including through institutions such as IRFC, continues to be a major driver of this growth.
Fiscal and Structural Considerations
Although India's fiscal metrics-including deficits and debt levels-are a credit weakness relative to peers, the agency noted enhanced fiscal credibility, transparency, and revenue buoyancy as positive influences. But it also noted risks if the private investment cycle fails to materialize, which would affect employment generation and the demographic dividend.
Market Impact:
The upgrade is designed to confirm investors and stakeholders regarding the financial health of IRFC and unhindered access to international capital markets for financing India's rail aspirations.
"IRFC's ratings are anchored to India's ratings (BBB-/Stable) because of the legal and funding relationships of IRFC with the Ministry of Railways," Fitch said in its recent review.
The stable outlook reflects optimism about IRFC's capacity to fund the government's infrastructure plans despite overall fiscal and structural issues remaining.
Source: Fitch Ratings, Economic Times, RailwayPro
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