BL reported that Indian Railway Finance Corporation has issued pass through certificates to investors for raising INR 962 crore. Thus, investors will get paid directly by the Indian Railways. The amount has been raised for 5 years at 8.99%. The issue was managed by a foreign bank present in India.

As per report, IRFC is budgeted to raise INR 7,200 crore this fiscal. It has already mobilized INR 6,360 crore. The average cost of funds is below 9%, with a weighted average tenor of 9.8 years.

Mr R Kashyap MD of IRFC said that “IRFC plans to raise another INR 470 crore before the financial year ends. The remaining requirement of about INR 370 crore will be used from IRFC’s internal funds.”

IRFC receives lease rentals from Indian Railways every 6 months for various rolling stock assets that it has financed for the Railways over the years. For the INR 962-crore transaction, IRFC identified a stream of lease receivables pertaining to identified assets.

For these assets, IRFC was supposed to receive lease rentals for 15 years and it has already received the rentals for 10 years. For the remaining 5 years, the lease receivables from the Indian Railways will go directly to the investors. For this to happen, IRFC has issued PTCs to the investors. The PTCs can also be traded in the secondary market.

Mr Kashyap said that “We forego our right to receive lease rentals from the Railways for the remaining five years for these assets. This is the first classical securitization deal of IRFC. The issue was subscribed almost 2.5 times.”

According to the RBI rules, since the transaction is between the Railways and investors, this is an off balance sheet item for the IRFC, which means the amount will not be added to IRFC’s debt. By the end of the current fiscal, IRFC is likely to reach a debt equity ratio of 9.5:1. The organization has to maintain a debt equity ratio of below 10:1.

(Sourced from Business Line)