IRFC’s overseas bonds get record investor interest


Indian Railways Finance Corporation (IRFC), which arranges financing for the country’s state-owned railroads, saw eight times more demand than bonds on offer, with investors largely seeking shorter-duration of the debt sold overseas. This is a record order book for any noncorporate local issuer.

The company is estimated to have received $7.5-8 billion worth of demand for $1 billion of bonds sold Thursday. Two maturities, of 10 and 30 years, were on offer. ET reported the fund raising Wednesday.

“The outstanding investor response will prompt us to tap overseas credit more frequently in the coming days,” Amitabh Banerjee, managing director at IRFC, told ET. “We have leveraged the crisis created by the Coronavirus scare. Investors are left with more deployable money due to the complete shutdown in East Asia.”

The longer maturity paper initially offered 3.95%, while the 10-year series could offer 160 basis points over and above US Treasury benchmark at 1.65%. The pricing is yet to be finalised.

“This investor response to a government-owned company immediately after the budget would encourage others to tap overseas credit,” said an investment banker.

MUFG, BNP, Barclays, and Standard Chartered Bank are among the bankers that helped the government-backed company raise the money.

The proceeds would be used to buy engines, wagon coaches and other expansions of railway systems. For project funding, IRFC is the agency that routes longterm money from LIC to the Indian Railways. It has tied up with the country’s largest insurer for project funding.

Globally, $13 trillion worth of sovereign bonds are yielding negative returns. This means investors have to pay for the privilege of owning such debt.

IRFC filed draft papers with the capital market regulator, the Securities Exchange Board of India, for its initial public offering (IPO) last month. The proposed issuance may hit the markets in the next few months.