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Mamuni Das

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New Delhi March 7 Indian Railway Finance Corporation (IRFC) has brought down its total cost of borrowing funds (Rs 4,000 crore) to about 7.5-7.6 per cent this fiscal supported by two bond issues in the external markets.

It recently raised 15 billion through a five-year fixed rate Samurai bond issue and has tied up $125 million through private placement in the US market.

In the 2006-07 fiscal, out of the Rs 4,000 crore, IRFC raised Rs 2,900 crore from the domestic market and about Rs 1,100 crore from the external market.

The entire domestic market funds of Rs 2,900 crore were raised through a mix of loans and bonds at a weighted average cost of about 8.55 per cent and an average tenor of 10.2 years.

But after the two external bond issues, IRFC's weighted average cost of funds has come down to 7.5-7.6 per cent with a weighted average tenor of about ten years.

IRFC had a Samurai bond issue at a total cost of 1.91 per cent per annum (to be paid back in yen), and a bullet repayment system, which essentially means that the company would pay back the principal at the end of the five-year tenor, Mr R. Kashyap, Managing Director, IRFC, told Business Line.

However, this does not include the hedging cost. "We may hedge the currency risk later if required," he said. Thus, in case IRFC covers its currency risk, its cost of funds may go up.

Early players

With private placements in the US bond market becoming possible since last year with the country's rating being upgraded, IRFC has become one of the early players to tap this market. It has tied $125 million through a bond issue in the US bond market through private placements at a "cost of below six per cent and tenor of ten years". IRFC funds are used to buy rolling stock and leased to the Indian Railways (IR).

Till March 31, 2006, IRFC had financed 1,540 electric locomotives (out of 3,121 locos of IR); 1901 diesel locomotives (from 4879 diesel locos of IR); 23,899 coaches (from a total of 37,870 coaches) and 115,514 wagons (out of 232,054 wagons of IR).

IRFC was budgeted to raise Rs 4,170 crore in 2006-07 fiscal.

The organisation had a carry forward of about Rs 200 crore since 2005-06. In 2007-08, IRFC is budgeted to borrow a record high of Rs 5,000 crore. "We should not have a problem in raising Rs 5,000 crore," Mr Kashyap said.

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