The Hindu Business Line : IRFC raises Rs 1,200 cr through domestic bonds issue

New Delhi, Aug. 3 Indian Railway Finance Corporation (IRFC), the fund mobilising arm of Indian Railways, has already raised about Rs 1,200 crore this fiscal by issuing bonds in the domestic market.

The weighted average cost for these funds is 9.8 per cent with an average tenor of 12.5 years. Compared with the funds raised in the corresponding period last year, IRFC’s cost of borrowing has gone up by one per cent. IRFC funds are used to buy rolling stock and they are leased to the Indian Railways.

Bullet Repayment

The average tenor for the domestic funds have been maintained at 12.5 years consciously since IRFC wants to keep the average tenor of the total funds at about 9.5 years to match with the life of its asset base.

“We plan to raise about $250 million of external commercial borrowings this fiscal, which would have lower tenors and thus bring down the average tenor for total funds,” Mr R. Kashyap, Managing Director, IRFC, told Business L ine.

The Rs 1,200 crore bonds have been issued with different tenors of 10, 15 and 20 years. “We have raised Rs 220 crore with 10 year bullet repayment bonds, Rs 150 crore with 15 year bullets, Rs 320 crore with 20 year bullets and Rs 500 crore with 15 year amortisation,” Mr Kashyap said. A bullet repayment scheme essentially means that IRFC would have to pay back the principal at the end of the bond tenor.
Domestic Funds

Mr Kashyap, however, declined to share the cost break up of bonds. The funds have been raised from about 8-10 banks, details of which IRFC was not willing to divulge. In 2007-08 fiscal, IRFC has been given a target to raise a record Rs 5,000 crore.

The company aims to mop up the most of the domestic funds by third quarter. The external commercial borrowings (of about $250 million) are likely to be raised during January-March 2008. “Usually we raise funds from the external market in January-March, which is the first quarter for those firms,” said Mr Kashyap.

In 2006-07 fiscal, IRFC brought down its total cost of borrowing of Rs 4,000 crore to about 7.5-7.6 per cent supported by two bond issues in the external markets. 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.

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