The Indian Railway Finance Corporation (IRFC), the financing arm of the railways, is planning to raise R10,000 crore from tax-free bonds. IRFC is eyeing the January-end period to issue the bonds.
This would the largest such offer by IRFC so far. Last year, the firm issued tax-free bonds worth R7,000 crore as part of the Rs 30,000 crore window opened by finance ministry to raise funds for the infrastructure sector.
IRFC, which raises funds from the market to finance rolling stock and some bankable fixed assets of the Indian Railways, is expecting to raise the full quota of R10,000 crore in multiple tranches.
The company is expecting the bonds to carry a coupon rate of 7.5% to 8%. Last fiscal, the corporation raised funds at a weighted average interest rate of 8.73%, which was 0.57% lower than the average cost achieved by all AAA-rated entities put together.
"Our last bond issue received overwhelming response from investors who subscribed it by close to three times. We expect to repeat the performance this year too," said a senior official in IRFC.
The official added that the expectation of an interest rate cut next year could prop the bond market up and help it fetch a premium on its trade.
The finance ministry had opened a window of R60,000 this year to raise funds for power and infrastructure publioc sector entities.