The Hindu Business Line : IRFC borrowing cost goes up to 9.5%

The numbers
The entire Rs 3,200 crore have been mopped from the domestic market and IRFC is yet to access the external commercial borrowings market.
This year, IRFC has a budgeted target to raise a record Rs 5,240 crore, including Rs 240 crore for Rail Vikas Nigam Ltd.

Mamuni Das

New Delhi, Dec. 25 The cost of borrowings for Indian Railway Finance Corporation (IRFC) has gone up this fiscal with IRFC raising Rs 3,200 crore till date in 2007-08 at an average cost of 9.5 per cent and weighted average tenor of 12 years.

Last financial year, IRFC had raised funds from the domestic market at an average cost of 8.55 per cent.

The entire Rs 3,200 crore have been mopped from the domestic market and IRFC is yet to access the external commercial borrowings (ECB) market.

IRFC mobilises funds from the market for buying rolling stock and providing them on long-term lease to the Indian Railways. This year, IRFC has a budgeted target to raise a record Rs 5,240 crore, including Rs 240 crore for Rail Vikas Nigam Ltd (RVNL).

BOND ISSUE

The company mobilised about Rs 700 crore by issuing bonds in October this year. “We raised Rs 200 crore through five-year bullet bonds at below 9 per cent and Rs 500 crore through another 15-year bullet bond issue for slightly less than 9.25 per cent,” Mr R. Kashyap, Managing Director, IRFC, told Business Line.

A bullet repayment scheme essentially means that IRFC would have to pay back the principal at the end of the bond tenor.

In September, IRFC had raised another Rs 1,000 crore through a 15-year bond issue. “This bond issue, which cost us close to 9.5 per cent, has no repayment for the first 10 years. For the subsequent five years, there is an equal monthly instalment repayment,” Mr Kashyap said pointing out that for a 15-year period, this bond option was popular with the investor community.

“Such bonds are relatively more tradable in the secondary market,” he said.

IRFC also had two transactions in August and raised a total of Rs 300 crore with five-year tenor through bank loans.

“We raised Rs 150 crore for close to 9 per cent and another Rs 150 crore at below 9.5 per cent costs,” Mr Kashyap said. Till August, IRFC had raised about Rs 1,200 crore through bond issues in the domestic market, for which the weighted average cost was 9.8 per cent with an average tenor of 12.5 years.

On its ECB plans, Mr Kashyap said, “We would raise $250 million if permitted by RBI.”

In 2006-07 fiscal, IRFC brought down its total cost of borrowing of Rs 4,000 crore to about 8.22 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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