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Informist, Tuesday, Apr. 22, 2025

 

--IRFC source: Look to raise yen-equivalent $500 mln from Tokyo mkt in 3 mos

--IRFC source: May tap dollar market if US Treasury yields fall further

--IRFC source: Hopeful of hearing back soon from fin min on zero-coupon bond

--IRFC source: Aim to finance INR 350 bln-INR 400 bln worth of projects FY26

--IRFC source: Plan to diversify lending on slump in railways business

 

By Priyasmita Dutta, Shubham Rana, and Sagar Sen

 

NEW DELHI – State-owned Indian Railway Finance Corp. Ltd. is likely to borrow the yen-equivalent of $500 million from the Tokyo market in the next three months to finance its plans of foraying beyond the conventional railway sector in 2025-26 (Apr-Mar), a senior company official said Thursday.

 

"Now that we are expanding the lending avenues and there is a scope to perform better in terms of margins, we will be looking at various options to raise funds," the official told Informist.

 

While the company has firmed up its plans to tap the yen market, it is yet to take a call if these will be green bonds. "There is a possibility that we may do yen-denominated green bonds," the official said. "If those funds are deployed in projects that are linked to clean transportation or smart projects, then these will fulfil the metric of being green loans," the official added.

 

The $500-million borrowing from the Tokyo market will be part of the company's overall borrowing programme for FY26 that will be finalised on Apr. 29 when the company's board meets to finalise its earnings for FY25.

 

In FY25, the company had the board's approval for raising up to INR 500 billion. According to data available with Informist, IRFC borrowed INR 272.4 billion from the domestic market through 10 tranches in FY25, issuing bonds ranging between five years and 15 years in tenure. The lowest coupon it paid in FY25 was 7.09% for 10 years and the highest was 7.44%, also for 10 years.

 

IRFC had first raised funds from the yen market in FY22. It had raised the equivalent of $1.10 billion in two tranches of $700 million and $400 million, with a tenure of 10 years and seven years, respectively. These were in the form of green bonds or green loans.

 

The company official said IRFC may also consider raising funds from the dollar market also if the yields soften in near future and the overall cost is competitive.

 

According to debt market participants, a AAA-rated company such as IRFC will be able to borrow in dollar terms at a cost that is at least 200 basis points lower than the domestic borrowing rate. The current 10-year borrowing rate for an AAA-rated public sector undertaking is just below 7%. This means IRFC will be able to borrow in dollars at 5% or lower. For borrowing in yen, the cost will be even lower, according to debt market participants.  

 

IRFC has sought the finance ministry's approval to raise around INR 50 billion through zero-coupon bonds, which the official said, the company is "hopeful of hearing back soon." Zero-coupon bonds do not pay any interest and are issued at a discount to face value. A company looking to raise funds through zero coupon bonds needs approval from the Central Board of Direct Taxes since income from zero-coupon bonds is a capital gain and is taxed at a lower rate, as opposed to interest income from regular bonds that is taxed at the marginal rate of tax.

 

The company is also diversifying its lending to include a variety of projects as it is seeing a slowdown in growth of the railways business. "Currently, in the product portfolio mix, lending to non-railways is about 1%. This will go up significantly," the IRFC official said. IRFC is allowed to finance projects that have forward and backward linkages to railways.

 

The navratna PSU is likely to aim to finance INR 350 billion–INR 400 billion worth of projects in FY26, of which around INR 250 billion-INR 300 billion would be in the backward and forward linkage category, the official said.

 

IRFC has already started disbursing loans for such projects which have forward and backward linkages with the railways. In January, the company said it has emerged as the lowest bidder to finance a project worth INR 31.67 billion to develop the Banhardih coal block in Jharkhand. In March, the company said it has entered into an agreement with NTPC Renewable Energy Ltd. to extend it a term loan of INR 50 billion. The disbursement to NTPC Renewable Energy has already started, the official said.

 

"The company is also bidding for thermal power plants for refinancing. We are already in discussion to refinance a power plant in Chhattisgarh, which is originally a PFC loan," the IRFC official said. IRFC has also bid to finance the Haryana Power Generation Corp. Ltd.'s Deenbandhu Chhotu Ram Thermal Power Plant in Yamunanagar and is also in talks with Mumbai Metropolitan Region Development Authority, the official added.

 

IRFC is also looking at opportunities in the renewable power sector, and the company is in talks to finance East Central Railways, which has signed a 100 MW Power Purchase Agreement with O2 Power to buy renewable energy, the official said.

 

For the nine months ended December, IRFC had reported a net profit of INR 48.20 billion, up 2.7% on year. Total revenue from operations for the period was INR 204.28 billion, up 1.3% on year. At 0922 IST, shares of the company traded nearly flat at INR 131.36 on the National Stock Exchange.  End

 

US$1 = INR 85.15

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Ashish Shirke

 

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