INSUBCONTINENT EXCLUSIVE:
MUMBAI: State-owned insurer LIC of India will invest up to Rs 26,000 crore this financial year in the Indian Railways Finance Corporation
(IRFC), the market-financing arm of the railroad transporter, through bond subscriptions
The cost of the 30-year money is just 30 basis points higher than the benchmark bond yield, with a mechanism to reset the rate every 10
years, a top government official told ET.
For example, if the benchmark yield is at 7.90 per cent, the cost comes to 8.20 per cent
email queries.
IRFC is the market-financing arm of the state-owned railroad transporter, and had begun selling bonds about three decades ago
to diversify its debt-raising pool
From time to time, it sells bonds to lenders and financial institutions to raise long-term funds for the railways.
IRFC has set the
borrowing target in 2018-19 as it plans to issue a similar quantum bonds to LIC
The financial backer of the national carrier seeks to fund long-term projects availing a credit window mutually agreed with the LIC
two-three years ago.
In March 2015, the railways inked an agreement with LIC, the largest domestic institutional investor, to receive
funding assistance of Rs 1.5 lakh crore for railway projects over the next five years.
But it hit a regulatory hurdle as such investment
Insurance Regulatory and Development Authority (IRDA), the insurance regulator, demanded explicit government guarantee for the proposed
bonds.
Later, in March, the ministry of finance approved the government guarantee of Rs 5,000 crore for bonds to be issued by IRFC before
The process will continue for future issuances.
Under such a mammoth credit facility, IRFC enjoys certain relaxations
For example, there is a five-year moratorium for interest payment while for principal repayment, it is 10 years.
