Railways plans to raise rupee bonds offshore

NEW DELHI, 25/02/2011: A scene at the New Delhi Railway Station on February 25, 2011. The Indian Railway Budget for the year 2011-12 is presented by Union Railway Minister Mamata Banerjee in the Parliament House on February 25. Photo: Sushil Kumar Verma

Indian Railways Finance Corporation (IRFC) plans to raise up to $1 billion through offshore rupee bonds, making it the first domestic issuer to eye so-called ‘masala’ debt to diversify its source of funds.

IRFC plans to use the cash to build and renew infrastructure, and is informally talking to bankers to understand the appetite and pricing in the market for rupee offshore bonds.

“We have a board approval to raise $1 billion from offshore market, but we are yet to decide how much to raise via rupee bond after we see the detailed notification from RBI,” said IRFC Managing Director Rajiv Dutt.

IRFC plans to borrow a total of Rs.17,655 crore ($2.81 bln) in 2015-16 from domestic and offshore markets.

“We are trying to diversify our borrower base,” Mr. Dutt said, adding that cost would be an important factor to decide on the amount sought offshore in rupees.

The Reserve Bank of India (RBI) gave Indian companies the green light to raise bonds offshore in rupees earlier this month, a move seen as a small step towards full rupee convertibility, one of the objectives set by RBI Governor Raghuram Rajan, when he took charge in 2013.

Mr. Rajan has since said full capital account convertibility, which would allow foreign investors to repatriate money at will, could happen in ‘a short number of years.’