IRFC tax-free bond issue likely to hit market in Dec-Jan

New Delhi:  Indian Railway Finance Corporation, the fund-raising arm of the Indian Railways, is readying its tax-free bond issue, even as it is in the process of raising $1 billion from overseas markets.

Funds raised by IRFC are used for buying locomotives, wagons and coaches, with a small chunk going to Rail Vikas Nigam Ltd to fund bankable projects. The Railways pays back IRFC from the passenger and freight services earnings.

The Finance Ministry has permitted IRFC to raise up to Rs.10,000 crore through tax-free bonds this year.

“We are currently doing the documentation for the bond issue. It is likely to be the last large tax-free bond issue to hit the market in the current fiscal,” Rajiv Datt, Managing Director, IRFC, told.

The issue is likely to hit the market around December-January, say sources, though IRFC declined to comment on the timing. While Datt declined to comment on the timing and coupon rates of the issue, he did say that the coupon rates will be higher this year than its bond issues in the last two fiscals, given the market conditions.

IRFC, which set a target of Rs 15,103 crore in the current fiscal, has not raised any funds till the end of the second quarter. This is a repeat of the trend seen last year when it mobilised maximum funds towards the last quarter.

IRFC is also in the overseas market now to raise up to $1 billion. “We have invited bids for a $300-million syndicated loan with a five-year tenure. It has a green-shoe option, so we can raise more, depending on the offer,” Datt said.

On whether IRFC had lowered its borrowing plans for the current fiscal, Datt replied in the negative. Last fiscal, IRFC had a borrowing target of Rs 14,900 crore.

The borrowing cost of IRFC in 2012-13 stood at 8.12 per cent, which was 0.98 per cent lower than the average borrowing cost of all AAA-rated entities in India, according to R. Kashyap, Chairman, IRFC.