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To mop up resources, the Indian Railways is considering the option of divesting stake in some of its PSUs, which will be routed back to build infrastructure.
The Railways has set a target to raise ₹8.5 lakh crore over the next five years, of which ₹1 lakh crore will be invested in rolling stock, such as wagons, coaches and locomotives. It has already signed an agreement with LIC to raise ₹1.5 lakh crore for investment in infrastructure projects. The move to partially offload stake in some of its public sector units (PSUs) was among the various options discussed by Railway Minister Suresh Prabhu in a recent meeting of the advisory board on financial matters, which includes KV Kamath, President, Development Bank of BRICs Countries and former Chairman, ICICI Bank; Arundhati Bhattacharya, Chairperson, State Bank of India; Rajiv Lall, Executive Chairman, IDFC; and Raghav Bahl, who heads Quintillion Media Pvt Ltd; and senior Railway officials.
Incidentally, the Railways has already asked its various public sector units to undertake valuations.
“The money from such stake sale could be routed as equity to form a joint venture company proposed to be set up with Indian Railway Finance Corporation (IRFC) as proposed in the railway budget. The total mobilised funds through such a non-banking finance company can be 10 times the funds,” said sources present in the meeting.
IRFC, a public sector unit, is the fund-raising arm of the Railways, and largely funds rolling stock.
Concor stake The Railways is set to shed five per cent stake in Container Corporation of India (Concor), the only publicly listed Railways unit.
The other units where value can be unlocked are RITES, Ircon and Indian Railways Catering and Tourism Corporation (IRCTC).
But, the Railways is unlikely to sell stake in IRFC, with which Railways enters into annual agreements for repayments.
In this year’s budget, Prabhu had announced setting up an infrastructure fund, a holding company and a joint venture with an existing non-banking financial corporation of a public sector unit with IRFC, to raise long-term debt.
The debt can be raised from domestic as well as overseas sources, including multilateral and bilateral financial institutions keen on working with the Railways.
Another top railway official said that while many investors are waiting to put in money, the Railways has to first send investor-friendly signals.
“Railways need to tap the private equity market,” said the official.
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