Indian Railway Finance Corporation (IRFC) will hit the market with the public issue of its tax-free bonds on January 6.

Simultaneously, IRFC will also access the external market to raise $600 million.

“The bond issue will be open for two weeks starting January 6,” Rajiv Datt, Managing Director, IRFC, told Business Line. The issue size will be Rs 1,500 crore, with a green shoe option, which will basically allow IRFC to raise more funds in case of oversubscription.

IRFC, which has the Finance Ministry’s nod to mobilise Rs 10,000 crore through tax-free bonds, can raise up to Rs 8,650 crore now. It has already raised about Rs 1,340 crore through private placement route.

The coupon rates are 8.23 per cent for 10-year bonds and 8.4 per cent for 15-year bonds for institutional investors. For retail investors, the rates are 8.48 per cent for 10 years and 8.65 per cent for 15-year bonds.

$600-million thru ECB

In a related move, IRFC also plans to raise $600 million through external commercial borrowing. “We have already appointed lead managers for raising $600 million from external markets,” Datt said. IRFC has also raised about Rs 2,500-2,600 crore from the external market till date in the current financial year.

The coupon rates are higher than what was offered by IRFC in the tax-free bond issues in past two years, said Datt. Last year, IRFC had raised the maximum amount – compared with other issuers in the market, such as IIFCL -- through tax-free bonds.

IRFC is the fund-raising arm of the Indian Railways and the money raised by it is used to buy locomotives, wagons and coaches. A small share of funds is also routed toward financing bankable projects of the Railways. In 2012-13, IRFC funds were used to acquire 581 locomotives, 1,958 coaches and 14,801 wagons. The borrowing costs of IRFC in 2012-13 stood at 8.12 per cent, which was 0.98 per cent lower than the average borrowing cost of all AAA rated entities in India put together.

On a cumulative basis, till 2012-13, IRFC has borrowed over Rs 1 lakh crore for the Railways market, which has funded procurement of 6,654 locomotives, 38,571 coaches and 1.77 lakh wagons.

mamuni.das@thehindu.co.in

(This article was published on December 25, 2013)
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