Indian Railways’ arm had raised ₹4,200 cr in recent public issue

Indian Railways Finance Corporation (IRFC), the fund-raising arm of Indian Railways, is set to hit the market again with a public issue of tax-free bonds in the current fiscal.

“We are coming up with a public issue before March 31. We will raise the remaining amount from the tax-free bonds,” Managing Director, Rajiv Datt, told Business Line.

The firm has not yet fixed the exact date for the issue. The returns that investors can get in the next issue will be decided closer to when the issue hits the market, said Datt. Though IRFC raised more funds than the issue size in the recent tax-free bond issue that closed two days ago, it could not fill the entire green shoe option.

Through the public issue that closed on February 7, IRFC raised about ₹4,200 crore, said Datt. The issue size was ₹1,500 crore with a green shoe option and had a window to mobilise over ₹4,400 crore through the tax-free bond route.

In late 2013, IRFC had raised ₹1,337 crore via the tax-free window through private placement. The firm declined to comment on the $600 million (about ₹3,600 crore) that it is in the process of raising through external commercial borrowings.

In the current fiscal ending March 31, IRFC aims to raise ₹15,000 crore.

Money raised by IRFC is used to buy locomotives, wagons and coaches for Indian Railways, which pays it back from the revenues it earns by moving cargo and passengers.

A small share of IRFC funds is also routed to 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 ₹1-lakh crore for the Railways market, which has funded procurement of 6,654 locomotives, 38,571 coaches and 1.77 lakh wagons.

(This article was published on February 11, 2014)
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