New Delhi: Indian Railways Finance Corp. (IRFC), the financing arm of the ministry of railways, has decided to extend the closing date of its tax-free bond sale by more than a week to 8 February from Tuesday.
IRFC had raised Rs2,422 crore as of Tuesday, said investment bankers involved in the sale on condition of anonymity. The agency is looking to raise as much as Rs8,900 crore, with the proceeds going to finance the expansion of the railway network.
“We got a lot of demand from investors to extend the closing date and we thought it is the best thing to do,” said Rajiv Datt, managing director of IRFC. “We hope to be able the raise the entire sum of Rs8,900 crore by 8 February.”
IRFC is selling 10-year bonds with a coupon of 7.18% and 15-year bonds with a coupon of 7.34%. Retail subscribers have been offered 50 basis points (bps) more as an incentive. One basis point is 0.01 percentage point.
Investment bankers say the IRFC bond sale has been an outlier in terms of the response from corporate investors.
“Whereas most tax-free bond issuances this year have seen a dull response by the corporate category, the IRFC issue saw more corporates take a stand and invest in the issue, contributing over 47% to the IRFC subscription so far,” an investment banker said.
Retail investor response has been tepid, with individual purchasers accounting for just around Rs283 crore of the proceeds so far. Qualified institutional buyers and high networth individuals have invested around Rs820 crore and Rs162 crore, respectively.
“We hope the RBI rate cut will result in higher investor interest,” said the investment banker mentioned above.
The Reserve Bank of India reduced its key policy rate by a quarter of a percentage point on Tuesday. Bond prices typically rise during a cycle of declining interest rates.
SBI Capital Markets Ltd, Axis Bank Ltd, Enam Securities Pvt Ltd, A.K. Capital Services Ltd, Kotak Securities Ltd and ICICI Securities Ltd are handling the bond sale.