IRFC raises Rs.1200 Crore through Short-term Bonds

New Delhi: Indian Railways Finance Corporation (IRFC) — the financing arm of Indian Railways — raised Rs.1,200 crore through issue of short tenure bonds at a tenure of 7.95% on Wednesday, according to bond arrangers. These bonds have a tenure of two years.

“IRFC short-term bond issue has seen a good demand from mutual funds this time. With demand being high, the yields have fallen to sub-8% levels,” said Ashish Jalan, Assistant Vice-President at SPA Securities.

Last month, IRFC source had said the company would target to issue short-tenure bonds at yields of sub-8% levels.

IRFC BondsIRFC had previously issued short-tenure bonds worth Rs.2,625 crore in January at a coupon rate of 7.83%. In March, the company tried to tap the bond market to raise around Rs.3,000 crore, but had stopped the bidding when investors demanded higher yields.

Bond arrangers said bidders were asking for a coupon rate in the rangeof 8.38% to 8.50%, whereas IRFC was planning to issue bonds below 8.27% level.

IRFC’s borrowing target for FY16 is Rs.17,655 crore, according to a source, who had also indicated the company is waiting for the government’s notification on tax-free bonds. “As soon as the government puts a notification, we will like to make use of the limit allotted to us to raise funds through this instrument,” the source had said.

With liquidity being tight in March, investors were cautious on deploying their funds which had led to some hardening of yields.

Recently, HDFC had issued short-tenure bonds worth Rs.200 crore at a coupon rate of 8.45%, according to bond arrangers. National Housing Bank (NHB) had also raised Rs.500 crore through issue of three-year bonds at a coupon rate of 8%.

Bond arrangers indicated that Hinduja Leyland is also planning to raise about Rs.2,000 crore through bond market.

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