New Delhi: The Indian Railway Finance Corp. (IRFC), financial subsidiary of the Indian Railways, has raised Rs538 crore from the US bond market to fund the acquisition of coaches and locomotives.
This is its first bond issue in the US, and according to IRFC managing director R. Kashyup, it is, in equal part, targeted at increasing the number of sources (or markets) from which money can be borrowed, and testing the waters for further attempts at raising money. Kashyup added that the interest rate on the 10-year bonds is 5.94%.
“We need to broad base our investor profile so that we can overcome volatility in some markets and still raise money,” said Kashyup. He added that IRFC planned to approach other international markets to raise money this year. IRFC is expected to help fund the expansion of the Indian Railways by raising money.
It plans to raise Rs4,200 crore this year for the railways, which the national transporter will use to purchase more coaches and locomotives. “We have never visited the US market before. We decided to try it because it’s the only hub in the international market that we could approach for 10-year money as of now,” said Kashyup.
The railways’ dedicated financing arm has, in the past, raised money from Europe and Japan, but the instruments were for a lesser tenure. Bonds issued by IRFC carry a sovereign (or state) guarantee; this enables it to raise money overseas at relatively lower rates.
The railways proposes to invest Rs3 lakh crore over the next five years. A significant portion of this will be raised through borrowings. Railways officials said they did not know the exact amount that would be raised through debt.
Last year the corporation raised an amount of around Rs3,450 crore for rolling stock acquisition.