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The Indian Railway Finance Corporation (IRFC) plans to raise $500 million through external commercial borrowings in the current fiscal.
Last fiscal, IRFC had raised ₹15,200 crore, of which about ₹5,600 crore ($900 million) was through the external commercial borrowings route. The total funds were borrowed at a weighted average cost of 7.9 per cent and tenor of 10 years, sources in the know said. In effect, the borrowing costs were lower than that in the previous fiscal, when the company borrowed at 8.12 per cent.
IRFC has no plans to borrow in the first quarter ending June 30, as it has sufficient funds to meet the railways procurement plans.
Funds target The interim Budget set a target for IRFC to mobilise ₹13,800 crore in the current fiscal.
Money raised by IRFC is used to fund rolling stock of the Railways such as locomotives, wagons and coaches.
A small share of funds is also routed to financing bankable projects.
Before firming up its borrowing plans, the company is waiting for the forthcoming Budget to get clarity on whether the new government would permit raising funds through tax-free bonds.
Starting from 2009-10, the UPA-II had allowed many government-backed infrastructure firms such as IRFC, National Highways Authority of India, India Infrastructure Finance Corporation Ltd and Rural Electrification Corporation to mobilise money through tax-free bonds. That was a shift from the UPA-I, which had not allowed government-backed infrastructure firms to float such bonds.
Recently, rating agency Fitch said it expects IRFC’s debts to grow at 15-20 per cent per annum in the next two-three years due to the large capital expenditure budgeted by the government.
In 2012-13, IRFC funds were used to acquire 581 locomotives, 1,958 coaches and 14,801 wagons.
The borrowing costs during the fiscal stood at 8.12 per cent, down 0.98 per cent from 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.
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