IRFC’s move to scrap ₹5,000 cr 10-yr zero-coupon bonds issue is right

Mumbai, Dec 19

Of late, the state-run Indian Railway Finance Corporation (IRFC) scrapped its planned issuance of Rs 5,000 crore in 10-year zero-coupon bonds (ZCB) after bids came in at a higher yield from investors. Industry experts have hailed the decision by the IRFC as correct.

IRFC, the dedicated financing arm of the Indian Railways for mobilising funds from domestic as well as overseas capital markets, got bids at a 6.95 per cent cut-off, which was 16 basis points higher than the cut-off it had raised last month through the same instrument.

Last month, it raised Rs 2,981 crore through deep-discounted ZCB at an attractive yield of 6.79 per cent.

Talking to Bizz Buzz, MV Hariharan, ex treasury head, SBI says, “Prudent Move by IRFC. However, the undue haste was uncalled for. Indian Railways are attempting reforms but the road ahead is challenging.”

Investor appetite will continue to be cautious, given the uncertainties of viability. With the union budget too around the corner, its contours will define the next round of fundraising metrics. Undoubtedly the Railways require humongous funds and are likely to get a part of it, but with riders attached, he said.

The institution was looking to raise funds at a similar level but investors wanted a higher cut-off. As a result, it decided to scrap the issuance.