IRFC beats Lehman blues, raises $100 mn via ECBs

Despite the global liquidity crisis and risk aversion of institutional investors, the Indian Railway Finance Corporation (IRFC), the financing arm of Indian Railways, has raised $100 million (around Rs 500 crore) as external commercial borrowings (ECBs) at 145 basis points above the London Inter Bank Offered Rate (Libor).

IRFC is the first Indian firm that has managed to raise funds from the overseas market after the Lehman Brothers Holding collapse in September.

The company raised the loan amount from a consortium comprising Bank of Tokyo and Mitsubishi UFJ at six-months Libor plus a spread of 145 basis points, on which the first interest coupon for the loan works out at just over 4 per cent per annum.

IRFC had recorded a turnover of Rs 2,624.78 crore during the financial year 2007-08 as against Rs 2284.03 crore in the previous year. The company reported a net profit of Rs 422 crore in 2007-08 as against Rs 399 crore in the previous year.

The money which the company garners from these funds is used for acquisition of rolling stock assets and for meeting other developmental needs of the Indian Railways.

According to a senior official in the Ministry of Railways, IRFC was able to raise the said amount due to the consistent performance of Indian Railways in the last four years, generating a cash surplus of nearly Rs 25,000 crore annually after paying dividend.

“The competitive pricing at which IRFC raised the loan amount from the overseas market shows the confidence of the global community in the performance of the Indian Railways”, the official said.

In 2006-07, IRFC had successfully completed its maiden transactions in the overseas market. It raised 15 billion Yen through the issue of Samurai bonds in the Japanese capital market and $125 million through a private placement in the US.

The Samurai bonds issued had a tenure of five years at a coupon rate of 1.91 per cent per annum and the 10-year US private placement carried a coupon rate of 5.94 per cent per annum.