The Hindu Business Line : IRFC raises Rs 250 cr thru term loan

The Indian Railway Finance Corporation (IRFC), a public sector unit responsible for raising finance for the Railways, has recently raised Rs 250 crore in the form of a term loan from a public sector bank.

With this, IRFC has raised Rs 1,260 crore from the domestic market this financial year.

"The Rs 250 crore was raised as a five-year term loan, with bullet repayment system, at a cost of 8.15 per cent," Mr R. Kashyap, Managing Director, IRFC, told Business Line, declining to divulge the name of the bank.

A bullet repayment scheme means IRFC would pay back the entire principal at the end of repayment tenure.

Funds cost & break-up

The Rs 1,260 crore raised this fiscal till date from the domestic market has been raised at a weighted average cost of slightly lower than 8.3 per cent. The exact weighted average tenure is yet to be worked out though it is expected to be in the nine-year range.

This includes an amount of Rs 810 crore raised through bonds issue in the domestic market earlier this year, which was raised at a weighted average cost of 8.31 per cent with a 15-year tenor.

Moreover, the Rs 1,260 crore also includes Rs 200 crore raised through term loans.

"While Rs 50 crore was raised at an eight per cent cost over seven years with bullet repayments, Rs 150 crore was raised at 8.15 per cent for a five-year tenor with bullet repayments," Mr Kashyap said.

In addition to funds of about Rs 200 crore that were raised in 2005-06, but were carried forward to 2006-07, IRFC has already made available almost Rs 1,500 crore for Railways, he added.

However, for the total fund-raising plan of the present financial year, IRFC plans to bring down the cost.

"By raising funds through external commercial borrowings, we are targeting a lower cost for the entire funds this financial year than the present cost of funds," he explained.

IRFC is budgeted to mobilise Rs 4,170 crore for Indian Railways in the current fiscal.

"From the remaining amount, we would raise about Rs 800-900 crore through external commercial borrowings, while the rest would be raised from domestic market," Mr Kashyap said adding that the IRFC plans to access the external market in the second half this fiscal.

In 2005-06, IRFC had raised Rs 3,450 crore for Indian Railways at a weighted average, delivery cost of 7 per cent and a weighted average tenor of about 8 years.

This included an ECB component as well.