 "Railways seeks FinMin nod to raise $500 mn via Masala bonds")
If this happens, the railways will join the bandwagon of three other Indian companies, HDFC, state-run NTPC and Adani Transmission, which opted for masala bonds before.
The first to opt for rupee-denominated bonds was HDFC in July, where it raised Rs 3,000 crore, followed by NTPC, which raised Rs 2,000 crore and another Rs 500 crore by Adani Transmission in August. HDFC is also likely to go for a second tranche of bonds in September-October. The railways would raise the funds through the Indian Railways Finance Corporation (IRFC), which will be used in infrastructural projects. IRFC raises funds through rupee term loans from banks, taxable bonds, tax-free bonds and also foreign funds with due hedging.
As part of Prime Minister Narendra Modi’s plan to spend Rs 8.5 lakh crore over five years for railway modernisation, the national carrier was looking for various sources for funds. The investment is expected to increase by 20 per cent in 2016-17 to about Rs 1.21 lakh crore. Earlier this year, Railway Minister Suresh Prabhu had announced that the Life Insurance Corporation of India (LIC) had agreed to provide Rs 1.5 lakh crore for development of various commercially viable projects of the railways.
The investment was to be made over a period of five years. “Last year, railways had sourced Rs 9,000 crore from LIC and has set a target of Rs 20,000 crore for this year. We are also in talks with World Bank for raising $500 million and various pension funds,” Mittal added.
The $5-billion fund is likely to be operational by the first half of 2017. Modi had promised to list $1-billion equivalent of masala bonds in the UK during his visit to that country in November 2015.