Indian Railway Finance Corporation Sells $750 Mn Bonds At 2.80%

Indian Railway Finance Corporation (IRFC) on Thursday said it has sold USD 750 million worth of dollar-denominated bonds to overseas investors priced at a coupon of just 2.80 per cent per annum.

This is the maiden debt market activity that Railways' financing arm has done since going public on January 29 after the biggest IPO of the fiscal collecting Rs 4,633 crore through a public issue. It was subscribed 3.49 times during January 18-20.

The 144A/ Regulation S offering is under the company's recently updated USD 4 billion global medium-term note programme. Earlier this was only USD 2 billion, the dedicated market borrowing arm of the Railways said in a statement.

The bonds achieved one of the tightest pricings by a domestic entity in the recent times, as the pricing is just 167.50 bps over the US treasury, it added.

This means IRFC could price the issue even below the price at which its own secondary paper is trading in the international markets and is around 55 bps cheaper than recent issuances of identical tenor by its domestic peers.

The 10-year bonds will be issued on February 10, 2021, at a fixed rate of 2.80 per cent and carry semi-annual interest payment and bullet principal repayment.

Its Chairman and Managing Director Amitabh Banerjee said, "We are a well-known name in the foreign bond issuance. The amount is a part of our USD 4 billion global medium-term note programme. We will be looking to raise the rest of the amount by the end of this fiscal."

Its credit ratings are similar to the sovereign ratings which help it get competitive rates with suitable tenors, he added.

The issue, launched on Wednesday, received overwhelming response from a diverse set of investors spread across the globe with an oversubscription of nearly four times.

Investors include sovereign wealth and pension funds, life insurance companies, banks and asset management companies from Asia, Middle East, Europe and the US.

The bonds will be listed on the Singapore Exchange, India International Exchange and the London Stock Exchange.

Incorporated in 1986, IRFC follows a financial leasing model to finance acquisition of rolling stock assets, which includes locomotives, coaches, wagons, trucks, flats, electric multiple units, containers and cranes.

Since the first week of January, various domestic issuers like the Exim Bank, State Bank of India, Continnuum Wind Energy, Adani Ports, and Ultrtech Cements have raised close to USD 4 billion in dollar bond sales as the interest rates are at the lowest in decades.

Aditya Birla flagship firm Ultratech is the market with a USD 400-million issue and is likely to be closed later in the day on Thursday.

Standard Chartered, PNB Paribas, DBS, HSBC, MUFG and SBI Caps, among others, were the merchant bankers to the issue.

Fitch Ratings has given BBB- rating to the issue with a negative outlook to the RegS/ 144A senior unsecured notes.

The net proceeds from the proposed notes will be used for funding the acquisition of rail assets, which IRFC will lease to the Railways, and to meet the debt-financing requirements of various entities in the Indian railway sector, Fitch said.

IRFC's shares on Thursday rallied 4.5 per cent on the BSE to close at Rs 25.35 apiece.