The Hindu Business Line : IRFC raises Rs 2,700 cr at 9%

New Delhi, Dec. 3 The Indian Railway Finance Corporation (IRFC) has raised about Rs 2,700 crore till date this fiscal at a weighted average cost of 9 per cent and an average tenor of 10.22 years. In 2007-08, IRFC had raised Rs 4,609 crore at 9.3 per cent.

As on March 2008, IRFC had financed 54 per cent of 3,447 electric locos of Indian Railways, 43 per cent of 5,210 diesel locos, 66.43 per cent of 41,623 coaches, and 51.55 per cent of 2,40,562 wagons of Indian Railways.

The financing arm of railways is looking to raise $400 million more from the external market this fiscal when the market conditions are conducive, having recently raised $100 million.

“We raised $100 million from Bank of Tokyo-Mitsubishi, at an attractive cost of 145 basis points over the USD Libor for a five-year (bullet repayment) tenor, which means a cost of about four per cent,” Mr Rakesh Kashyap, Managing Director, IRFC told Business Line.

With this, the average cost of borrowing for Rs 2,700 crore is about nine per cent. “If we were to add the notional hedging cost, the cost of borrowing touches 9.4 per cent,” he said.

As an internal discipline measure, the IRFC has an exchange rate variation account to which it allocates certain funds. This account is operated till it hedges.

The company has had three bond issues since July. “Around July-August, we raised Rs 604 crore by issuing 10-year bonds. In October, we had two bond issues — Rs 855 crore (10-year) and Rs 615 crore (15-year),” Mr Kashyap said.

In the current fiscal, IRFC is budgeted to raise Rs 7,200 crore, including Rs 293 crore for its sister concern Rail Vikas Nigam Ltd. It has already given Rs 140 crore to RVNL.

SECURITISATION DEAL

IRFC may also opt for some securitisation deals in the domestic market to keep its debt-equity ratio below the RBI-prescribed levels of 10:1.

In the backdrop of the company approaching a higher debt-equity ratio, IRFC had raised Rs 800 crore towards the end of 2007-08 fiscal from LIC for the railways in a manner which ensured that the debt was not registered in IRFC’s balance sheet. The securitisation deal required the Indian Railways to repay the debt to LIC through half-yearly payments over a nine-year period.

IPO not now

Earlier this year, IRFC was contemplating an initial public offering (IPO) this fiscal or early next fiscal to raise funds. This is because the company has to maintain a debt-equity ratio of 10:1 under the stipulated RBI norms. Given the target to raise Rs 7,200 crore this fiscal, IRFC was to approach a debt-equity ratio of 9.99:1 by March ’09.

However, given the market conditions, the company is not looking at an IPO. Also, by opting for securitisation deals and regulating dividend payments, it has kept its debt-equity ratio under control. “After fresh equity infusion, at the end of 2006-07, IRFC had a debt-equity ratio of 9.17:1, while at the end of 2007-08, it was at 8.98:1,” Mr Kashyap said.

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