IRFC primarily funds buying of locomotives, coaches and wagons for the Indian Railways.

Indian Railway Finance Corporation (IRFC) has raised about Rs 1,032 crore till Wednesday through tax-free bonds.

The issue opened on Monday and the Railways’ fund raising arm mobilised about Rs 800 crore on the first day itself. The issue is open till January 29.

With this, IRFC has crossed the Rs 1,000 crore issue size. But the bond issue has a green-shoe option of raising funds of up to Rs 8,900 crore.

However, with the softening of Government securities (G-sec) bonds and returns on 10-year G-sec touching 7.8 per cent, IRFC is confident that investors will find the returns attractive on its tax-free bond issue.

Retail investors

For retail investors, IRFC is offering a coupon rate of 7.68 (10 years) and 7.84 per cent (15 years).

For high-net worth individuals and institutional investors, the interest rate offered is 7.18 per cent (10 years) and 7.34 per cent (15 years). IRFC primarily funds buying of locomotives, coaches and wagons for the Indian Railways. It receives lease rentals from the Railways, which is accounted for in the Railway Budget.

This ensures that the loans are securitised against rolling stock, allowing IRFC to raise funds at a lower cost.

The lead mangers for the issue are ICICI Securities, SBI Cap, Kotak Mahindra, Axis Enam and AK capital.

In the current fiscal, IRFC has to raise Rs 15,000 crore. Of this, it has already mopped up Rs 1,100 crore via tax-free bonds through private placement and Rs 1,650 crore through external commercial borrowings.

mamuni.das@thehindu.co.in

(This article was published on January 23, 2013)
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