Indian Railway Finance Corporation the resource mobilising arm of Railways raised INR 9,520 crore in 2009-10 at a weighted average cost of 7.75% and an average tenor of 8.5 years. This is lower than the fund raising costs for 2008-09, when the public sector unit had raised INR 6,523 crore from the market at an average cost of 8.98% with an average tenor of 9.6 years.

IRFC uses the funds to acquire locomotives, passenger coaches and wagons, which it then leases to the Indian Railways. The Railways, in turn, pays a lease charge on the assets owned by IRFC.

Mr R Kashyap MD of IRFC told Business Line that “The (lower) cost reflects market condition. Also, in 2009-10, IRFC had an external commercial borrowing issue of INR 2,159 crore, which helped bringing the cost down further.”

IRFC has also written to the Finance Ministry seeking a permission to raise the INR 3,080 crore tax free bond issue through 2010-11. This is because IRFC had mobilised only INR 1,920 crore through tax free bond issue in 2009-10 from the permitted level of INR 5,000 crore.

(Sourced from Hindu)