IRFC raises $750 mn in ECBs at a fixed 2.8% for 10 years

Mamuni Das New Delhi | Updated on February 04, 2021

Bond issue oversubscribed nearly 4 times


Indian Railway Finance Corporation (IRFC) has raised $750 million through external commercial borrowing at 2.8 per cent for a ten-year tenor. The issue, one of the lowest cost bond issues by an Indian entity, was oversubscribed nearly four times. The bonds carry semi-annual interest payment and bullet principal repayment.

IRFC has a target to raise ₹1.13-lakh crore this year. “IRFC is expected to raise about ₹70,000 to 75,000 crore in the remaining part of the fiscal, as per the demand from Ministry of Railways,” IRFC CMD Amitabh Banerjee told BusinessLine.

Next year, IRFC is mandated to raise ₹65,258 crore, as per budget estimates. There is a scope for equity infusion of ₹5,235 crore.

“The bonds achieved one of the tightest pricing by an Indian entity in recent times. In spite of the recent hardening in US treasury and credit margins, IRFC has been able to achieve a very fine pricing lower by approximately 55 bps compared to recent issuances of identical tenor by peers. This will help not only in diversification of the borrowing portfolio of IRFC but also bring down the company’s cost of borrowing further in the current fiscal,” Banerjee told BusinessLine.

Competitive pricing

The cost is competitive compared to IRFC’s similar attempt last year when it had raised $700 million from the external market at 3.249 per cent for a ten-year tenor, and $300 million for 30 years at 3.95 per cent.

“IRFC launched its $750 mn 144A/Reg S USD Bonds under the $4 billion Global Medium Term Note programme on February 3, 2021. The bonds are for a tenor of 10 years and were very tightly priced at 167.5 bps over 10-year benchmark rate pegging the coupon at 2.8 per cent,” IRFC stated. In very simple terms, 144A means funds are raised from US market, while Reg S means raising funds from Asian and European markets. “The fact that IRFC has been able to achieve a pricing even below the price at which its own secondary paper was trading, is a remarkable achievement,” he added.

The diverse set of investors included sovereign wealth funds, pension funds, life insurance companies, banks and asset management companies spread across Asia, Middle East, Europe and USA, according to Banerjee.

Published on February 04, 2021

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