IRFC bonds may see appetite only from insurers, pension funds

Suresh Prabhu in the rail budget had mentioned the need for market borrowings for financing remunerative projects in railways

The Indian Railway Finance Corporation (IRFC) bonds to be issued within the next few weeks will only see appetite from insurers and pension funds in the initial stages. Industry experts said that since these bonds are expected to be those with shorter maturities, insurers may look at it for investment from their unit-link funds. 

Bekxy Kuriakose, head – fixed income, Principal PnB Asset Management Company said, “We are not buying these bonds. The coupon on these bonds are low and currently we are fully deployed in our duration funds. May be insurance companies and pensions funds may take interest in these bonds.”

In his maiden railway budget, minister of railways Suresh Prabhu said that for financing remunerative projects through market borrowings, it is intended to tap low cost long term funds from insurance and pension funds, multi-lateral and bilateral agencies which can be serviced through incremental revenues. 

"Railways will create new vehicles to crowd in investment from long-term institutional investors and other partners. These may include setting up an infrastructure fund, a holding company and a JV with an existing NBFC of a PSU with IRFC, for raising long term debt from domestic as well as overseas sources...", he added.

The head of fixed income at a life insurance company explained that for the Ulip funds, they look at the shorter duration (3-5 years) and hence this would an attractive investment, if pricing is right. He however added that some clarity will be sought from the regulator if these instruments could be taken as part of infrastructure investments.

Industry experts said that apart from life insurers, large general insurance companies would also look at this investment option this year.