IRFC raised about ₹4,200 cr through first issue made in January and early February

The second public issue of tax-free bonds by Indian Railway Finance Corporation (IRFC) during this current fiscal is set to open on Friday.

The bonds will offer 8.44 per cent returns for 10-year tenures and 8.88 per cent for 15-year tenures for retail investors. For institutional investors, the returns will be 25 basis points lower in each tenure — 8.19 per cent for 10 years and 8.63 per cent for 15 years.

The issue will remain open from February 28 to March 7, according to sources in the know.

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

Through the first public issue spread over January and early February, IRFC raised about ₹4,200 crore.

The issue size was ₹1,500 crore with a green shoe option and had a window to mobilise over ₹4,400 crore through tax-free bonds.

Recently, IRFC, which is the market borrowings arm of Indian Railways, mobilised $500 million from external markets through an issue that was oversubscribed six times with the firm receiving offers for $3 billion.

It raised $500 million through a 5-year bond issue at a coupon rate of 3.917 a year. Global fund managers accounted for 76 per cent of final allocations, followed by banks (14 per cent), insurance/pension funds (6 per cent) and private banks (4 per cent).

In terms of geographical allocations, 54 per cent of IRFC’s new bonds went to European accounts, 38 per cent to Asian accounts and the remaining 8 per cent to US accounts.

In late 2013, IRFC had raised ₹1,337 crore via the tax-free window through private placement. For the current fiscal ending March 31, it has a target of raising ₹14,942 crore, according to revised estimates.

A small share of IRFC’s funds are also routed to financing bankable projects of the Railways. On a cumulative basis, till 2012-13, IRFC has borrowed over ₹1-lakh crore for the Railways, which has funded procurement of 6,654 locomotives, 38,571 coaches and 1.77 lakh wagons.

(This article was published on February 25, 2014)
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