Money & Banking

IRFC may go for $350-m ECB

Our Bureau New Delhi | Updated on February 02, 2011

Indian Railway Finance Corporation (IRFC), which funds rolling stock acquisition for the Railways, is likely to raise $350 million through external commercial borrowings, subject to RBI approval.

“We might raise $350 million through ECB. We have sought Reserve Bank of India approval for the same,” Mr R Kashyap, Managing Director, IRFC, told Business Line.

IRFC has a budgeted target to raise Rs 9,120 crore in the current fiscal. Of this, it has already mobilised Rs 6,551 crore through a mix of external commercial borrowings, taxable and tax-free bond issue.

For raising the remaining amount, it is considering various options, including bonds and loans.

TAX FREE BOND ISSUE

The company, which tried raising Rs 3,080 crore in a tax-free bond issue through private placement between November 15 and December 3, was able to mop up Rs 1,311 crore only.

“It just reflected the (lower) market appetite given the tight pricing of the issue,” Mr Kashyap said. The coupon rates were 6.05 per cent (five-year bonds), 6.32 per cent (seven-year bonds) and 6.72 per cent (10-year bonds), with semi-annual payments.

The Finance Ministry had given its nod to IRFC to raise Rs 3,080 crore and fix coupon rates between 6 per cent and 7.25 per cent a year depending on the size and tenor of the tranche.

On whether IRFC would again enter the market this fiscal with another tax-free bond issue, Mr Kashyap said it is considering such a move but has not decided.

On whether IRFC was considering a move to offer higher returns if it were to come out with a second tax-free bond issue during the fiscal, Mr Kashyap reiterated the company has not yet taken a decision. “We have to keep investor relations in mind,” he said, indicating that the initial investors in tax-free bonds would find such a move unfair.

Apart from the tax-free bonds, IRFC has raised Rs 5,240 crore at a weighted average cost of about 8 per cent and an average tenor of 13-and-a-half years in the current fiscal.

This included mobilisation of Rs 3,655 crore through domestic bonds with a weighted average cost of 8.65 per cent and weighted average tenor of 17-and-a-half years. IRFC had also mobilised $350 million (Rs 1,585 crore) through external commercial borrowings.

Till March 2010, IRFC has mobilised funds for the Railways' rolling stock valued at Rs 62,457 crore.

>mamuni@thehindu.co.in

Published on February 02, 2011

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