You are here: Home » Budget » Railway Budget » Top Stories
Business Standard

IRFC to gain from soft interest rates despite higher borrowing in FY16

Analysts say IRFC's instruments carry "AAA" rating and it is able to raise money at 5-10 basis points lower than its peers

BS Reporter  |  Mumbai 

Despite a sharp rise in proposed market borrowings in 2015-16, the Railways will get to benefit from falling interest rates. It raises funds through a 100 per cent-owned entity, Indian Railway Finance Corporation (IRFC). The market borrowing is projected at Rs 17,655 crore, an increase of 46.5 per cent over 2014-15, according to estimates. Read our full coverage on Union Budget Market analysts said IRFC’s financial instruments carry an ‘AAA’ rating and it has been able to raise money at an interest rate which is five to 10 basis points lower than what peers pay. Ritesh Jain, chief Investment Officer, Tata Asset Management Company, said with sound financial health and being fully government-owned unit, IRFC is a most preferred issuer in the market.

In keeping with the soft interest rate environment, bond yields have fallen 75 per cent in this financial year.

These are expected to fall further, in line with a cut in key policy rates by the Reserve Bank of India. This will help IRFC to contain the interest costs. Borrowings in the current financial year were pegged at just over Rs 12,000 crore. IRFC has already raised about Rs 8,000 crore from the market and expects to do so for another Rs 4,000 crore before end-March, an official said. According to CARE Ratings, consistently profitable operations, strong asset quality and nil non-performing assets, with demonstrated government support evident from lease agreements enabling transfer of interest & exchange risks to the ministry of railways are key strengths. During FY14, IRFC’s total income was Rs 6,198 crore, with net profit of Rs 701 crore. In 2012-13 it had a net profit of Rs 502 crore on total income of Rs 5,552 crore.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Fri, February 27 2015. 00:37 IST