Indian Railway Finance Corp turns to masala bonds, eyes Rs 2,000 cr

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October 7, 2016 6:08 AM

Indian Railway Finance Corporation (IRFC), the finance arm of Indian Railways, is planning to raise Rs 1,000-2,000 crore through an issue of rupee-denominated offshore or masala bonds.

Indian Railway Finance Corporation (IRFC), the finance arm of Indian Railways, is planning to raise Rs 1,000-2,000 crore through an issue of rupee-denominated offshore or masala bonds. The company will be ready with the issue document within the next two-three weeks, director of finance Neeraj Kumar told FE.

The instruments will have a tenure of three-five years, Kumar said, and the company is optimistic of getting a coupon of around 7% or below. IRFC had last borrowed three-year money at 7.65% at the end of June. Since then, bond yields have declined, with the benchmark yield having fallen by close to 70 basis points. Currently, the yield on the 3-year government bond is at around 6.58% while that of 5-year government bond is at around 6.70%.

 

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Since IRFC is a government entity, bonds issued by it are treated as quasi-sovereign and typically carry coupons close to the government bond with the same tenure. S&P Global Ratings recently affirmed ‘BBB-‘ issuer rating on IRFC. “We had made the announcement in April but the market conditions at the time were not conducive for an issue. Also, April and May are generally not months when railways needs a lot of funds. The demand for funds usually picks up in the second half of the financial year,” Kumar said.

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