New Delhi: Indian Railways Finance Corp. (IRFC) will on 21 January start selling tax-free bonds to the public to raise Rs.8,900 crore as part of its borrowing programme.
The issue will close on 29 January, said Rajiv Datt, managing director. The AAA-rated bond issue includes a 10-year paper with a coupon of 7.18% and a 15-year paper with a coupon of 7.34%. Retail subscribers will be offered 50 basis points (bps) more as an incentive. A basis point is 0.01 percentage point.
Lead managers for the issue include SBI Capital, Axis Enam, AK Capital, Kotak Securities and ICICI Securities.
“We are confident the issue will be oversubscribed,” Datt said.
IRFC recently raised Rs.1,100 crore in a private placement. If the public issue is successful, the company will meet the finance ministry’s mandate for it to raise Rs.10,000 crore by way of tax-free bonds this fiscal year.
The budget requires IRFC to raise a total Rs.15,000 crore in the year ending March for Indian Railways. Having raised around Rs.2,600 crore through a mix of private placements and external commercial borrowings (ECBs), it will need to raise a little less than Rs.2,400 crore this fiscal year, Datt said.
The company will take a call on whether this remaining amount should be raised through taxable bonds, ECBs or term loans by mid-February.
Of the total amount, Rs.14,896 crore will be used to finance rolling stock and Rs.104 crore for railway projects being executed by Rail Vikas Nigam Ltd.
Datt said IRFC expects to make a profit of about Rs.500 crore in the fiscal year. IRFC doesn’t intend to revive project financing.
“The company is only comfortable with rolling stock financing,” Datt said. “Project financing was taken up last year, but there are risks of time and cost overruns that may affect the company’s rating and its borrowing costs.”