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Indian Railways Finance Corporation (IRFC), the Railway Ministry’s dedicated fund-raising arm’s Initial Public Offering (IPO), which was held in abeyance last year due to COVID-19, is now set to hit the market between January 18 to January 20.
It will open for anchor investors – the institutional investors who are expected to put in assured amount of money – on January 15. The price band for the IPO is ₹ 25-26 an equity share on a face value of Rs 10 each. Retail investors can bid in lots of 575 shares.
From about ₹4,600 crore that the IPO is expected to mop up, roughly about ₹ 1,500 crore will go to Government and two-third will accrue to IRFC, which will add to company's net-worth and enable IRFC to raise more money from the market, said Amitabh Banerjee, Chairman and Managing Director, IRFC.
The IPO is for up to 178.2 crore shares, including a fresh issue of up to 118.8 crore shares. The offer for sale is for up to 59.4 crore shares.
IRFC’s borrowing target for the present fiscal is expected to be revised upwards to ₹ 1.10 lakh crore, up from the revised target of ₹ 62,567 crore for the present fiscal. Banerjee said this in a virtual press meet here Wednesday. This means IRFC will have to raise almost ₹ 75,000-80,000 crore in the remaining part of the present fiscal.
Cost of borrowing for IRFC was 7.37 per cent in fiscal 2020, 8.08 per cent in fiscal 2019 and 7.75 per cent in fiscal 2018. It lends to Railway Ministry on a cost-plus basis, at a rate that is decided between the Railways and IRFC. “In the pandemic situation, in the background of a good liquidity situation that we had this year, we have leveraged this (lower cost) to our advantage. We hopefully will be able to lower the cost (of borrowing) significantly this year and pass it on to the Ministry of Railways,” said IRFC’s Banerjee.
A large chunk of the borrowing for present fiscal is expected to be through external commercial borrowings, according to the IRFC CMD. Speaking about IRFC's overseas borrowing plan this year, Banerjee said the company intends to borrow $2.5 bn through bonds and $1 bn through syndicated loans.
In the present fiscal, over 70 per cent of funds raised by IRFC will be used for funding infrastructure, while the remaining funds (about ₹ 31,000 crore) will be used for buying rolling stock such as wagons, locomotives, coaches and track machines. At present, IRFC's mark-ups are marginally higher for rolling stock leasing.
The risk on receiving lease rentals is almost zero, and that is why IRFC has nil Non Performing Assets, he said. Going forward, IRFC is open to lend to other infrastructure projects as well that contribute towards increasing the carrying capacity of railways.