Indian Railway Finance Corporation Ltd. to raise upto Rs. 8,886.40* Cr through Public Issue


January 17, 2013

Indian Railway Finance Corporation Limited



(A Government of India Enterprise)



Indian Railway Finance Corporation Ltd. to raise upto Rs. 8,886.40* Cr through Public Issue of Tax Free, Secured Redeemable, Non- Convertible Bonds in the Nature of Debentures



· Issue Opens on : January 21, 2013



· Issue Closes on : January 29, 2013



· Face Value of Bonds : Rs. 1,000/- each



· Credit Rating : “CRISIL AAA/Stable”by CRISIL ; “[ICRA] AAA” by ICRA ; “CARE AAA” by CARE

· Lead Managers to the Issue :SBI Capital Markets Limited, A.K. Capital Services Limited, Axis Capital Limited, ICICI Securities Limited and Kotak Mahindra Capital Company Limited



New Delhi, January 16, 2013: Indian Railway Finance Corporation Limited (“Company” OR “IRFC” OR “Issuer”) a dedicated financing arm of the Ministry of Railways (MoR), will open its Public Issue of tax free, secured, redeemable, non-convertible bonds of face value of Rs 1,000 eachin the nature of debentures on January 21, 2013. As per the terms of the CBDT Notification, IRFC has been authorized to issue Bonds (having benefits underSection 10(15)(iv)(h) of the Income Tax Act) upto an aggregate amount ofRs. 10,000 crores, during the Fiscal 2013. This tranche issue by the company is of bonds aggregating to Rs 1,000 crore with an option to retain oversubscription up to the Shelf Limit (i.e., up to Rs 8,886.40 crore*).



* Pursuant to the CBDT notification, IRFC has raised Rs 1,11,360 lakhs through the private placements of Bonds. In case our Company raises any further funds through private placement not exceeding Rs 2,50,000 lakhs, i.e. upto 25% of the allocated limit for raising funds through tax free bonds during Fiscal Year 2013, during the process of the present Issue, the Shelf Limit for the issue shall get reduced by such amount raised.



These bonds being offered, as part of Tranche- 1 shall bear a fixed rate of interest and are under two Series- Series I and Series IIhaving a tenure of 10 years and 15 years, respectively. In case of Series I, the interest rate of 7.68% p.a. is applicable to retail individual investors– Category IV (i.e. Resident Indian individuals, Eligible NRIs on a repatriation or non – repatriation basisand HUFs), while for the Qualified Institutional Buyers– Category I, Non-Institutional Investors – Category II and HNIs– Category III the interest rate is 7.18% p.a. In case of Series II, the interest rate of 7.84%p.a is applicable to Retail



IndividualInvestors – Category IV (i.e. Resident Indian individuals, Eligible NRIs on a repatriation or non – repatriation basis and HUFs) while for the Qualified Institutional Buyers – Category I, Non-Institutional Investors – Category II and HNIs– Category III, the interest rate stands at 7.34% p.a.



The additional interest of 0.50% p.a shall only be available to the original Allottees under Category IV for the Tranche – 1 Series I Bonds and the Tranche – 1 Series II Bonds. In the event the Bonds held by the original Allottees under Category IV are sold/ transferred (except in case of transfer of Bonds to legal heir in the event of death of the original Allottee), the coupon rate shall stand revised to the coupon rate applicable for Allottees falling under Category I, Category II and Category III



Allocation of Bonds shall be made up to overall amount reserved for different categories of investors on first come first serve basis, determined on the basis of the date of upload of each application into the electronic system of relevant stock exchanges.



The bonds proposed to be issued under this Issue have been rated ‘CRISIL AAA/Stable’ by CRISIL, ‘CARE AAA’ by CAREand ‘[ICRA]AAA’ by ICRA. The ratings assigned by CRISIL, CARE, ICRA are considered to have the highest degree of safety with regard to timely servicing of financial obligations and carry lowest credit risk.



The funds raised through this issue will be utilized towards financing the acquisition of rolling stock which will be leased to the MoR in line with present business activities.



The Bonds are proposed to be listed on BSE Limited and National Stock Exchange of India Limitedwithin 12 working days of the Issue closing date.



SBI Capital Markets Limited, A.K. Capital Services Limited, Axis Capital Limited, ICICI Securities Limited and Kotak Mahindra Capital Company Limited are the Lead Managers to the Issue. Karvy ComputersharePvt. Ltd. is the Registrar to the Issue, while SBICAP Trustee Company Ltd. is Trustee for the Bondholders.



About IRFC:



Indian Railway Finance Corporation Ltd. (IRFC) is a dedicated financing arm of the Ministry of Railways (MoR).It has a strategically important role in the business of raising funds for the MoR since MoR relies primarily on the Company for external funding of its rolling stock(Passenger Coaches,Locomotives and Wagons)



At the beginning of each Fiscal Year, the MoR notifies the Company of its financing requirements which are to be met through market borrowings. The Company then undertakes to provide finance to the Indian Railways subject to market conditions. At the end of each year, a lease agreement is drawn in relation to the rolling stock acquired by the MoR and apportioned to the Company during the previous year. Lease rentals represent theCompany’s capital recovery plus the cost plus a net interest margin. A part of the funds so raised are also utilised for funding bankable projects (i.e. such projects or proposals that have sufficient collateral, future cashflows and high probability of success) approved by the MoR and which are executed by Rail Vikas NigamLimited (“RVNL”). Similar to core lease transactions, the interest charged by the Company is on a cost plusmargin basis. In addition, the Company has also granted loans to other MoR agencies like Railtel Corporation ofIndia Limited (“RailTel”).