6.70% IRFC (India Railway Finance Company Limited) Secured, Tax-Free, Non Convertible Series
68B 2020 Bonds in the form of promissory notes of the face value of Rs.1,00,000/- each (“Bonds”)
being offered @ 7.35% yield
Key Features of the bonds:
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Coupon of 6.70% to be paid semi annually (15-Apr & 15-Oct)
The Bonds are Secured, Tax Free, Redeemable, Non-convertible, Non cumulative Railway Bonds in
the nature of Promissory Notes
Maturity of bonds on 8th Mar 2020 with no put/call option
Credit Rating of AAA/Stable by CRISIL, “CARE AAA” by CARE and LAAA by ICRA
Face Value of Rs.10 lakhs
Why considering investment in IRFC Tax Free Bonds Series 68B 2020:
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Currently available @ 7.35% yield (pre-tax yield of10.63 %)*, the return on the investment is better
than the traditional Fixed Deposit currently available in the market.
Great opportunity to lock in high yield for a significantly long period reducing the reinvestment risk of
your capital
The income by way of interest on these Bonds Tax free.
Regular Cash flow (semi- annual) for 10 years
*Calculated at Tax Rate of 30.9%
For complete details please read the "Product Brochure". The disclaimer by the Issuer is mentioned on pages
5-6 of the product brochure (Information Memorandum).
Kindly Note: 6.70% is the coupon payment on a face value of Rs.10 lakhs; the return on
the Investment is 7.35% if held till maturity.
Credit Rating Rationale (Source: CRSIL rating updated 13-Aug-2012):
To view the updated Ratings, please visit:
http://crisil.com/Ratings/RatingList/RatingDocs/IndianRailwayFinanceCorporationLtds_13Aug12.html
CRISIL has assigned its ‘CRISIL AAA/Stable’ rating to Indian Railway Finance Corporation Ltd’s (IRFC’s)
Rs.150.00-billion long-term borrowing programme, while reaffirming the ratings on the company’s other debt
instruments and bank facilities at ‘CRISIL AAA/Stable/CRISIL A1+’.
The ratings continue to reflect IRFC’s strategic importance to its parent, the Government of India (GoI),
because of the company’s status as the financing arm of Indian Railways (IR). The ratings also continue to
reflect IRFC’s strong capitalisation and asset quality, and adequate resource profile. These rating strengths
are partially offset by the company’s average earnings profile.
IRFC is strategically important to GoI because it is the financing arm of IR. IR, which functions under the
Ministry of Railways (MoR), constitutes a crucial part of India’s infrastructure. Hence, IRFC derives substantial
business and financial support from GoI. The support is reflected in IRFC’s ownership by GoI (100 per cent as
on March 31, 2012) and favourable lease agreements with IR. The agreements protect IRFC’s net interest
margin, and transfer the interest and foreign exchange risks on its borrowings to IR.
IRFC’s strong capitalisation is supported primarily by continued GoI support. As on March 31, 2012, its net
worth was around Rs.54 billion, with capital adequacy ratio of 260.6 per cent. GoI has been infusing equity
capital at regular intervals to support IRFC’s capital structure; GoI infused Rs.5.0 billion in January 2012. The
company has adequate gearing; however, it has increased to 9.3 times as on March 31, 2012 from 8.9 times
as on March 31, 2011. IRFC has strong asset quality, as most of its exposure is to IR. IRFC has adequate
resource profile supported by its ability to raise long-term funds from diverse sources at competitive rates. Its
borrowing costs increased marginally to around 8.2 per cent in 2011-12 (refers to financial year, April 1 to
March 31) from 8.1 per cent in 2010-11, and compares well with that of its peers. Furthermore, IRFC’s liquidity
is supported by its ability to receive advance lease rentals from IR, should it fall short of funds to service its
debt.
IRFC has an average earnings profile; as it is a funding vehicle, enhancing its profitability is not the primary
objective of IR. IRFC’s profitability is, however, maintained by way of a mark-up over its borrowing cost.
CRISIL therefore believes that IRFC will continue to generate adequate return on its assets (0.9 per cent in
2011-12).
About the Company: A dedicated funding arm of the MoR, IRFC was established in 1986 specifically to raise
resources from the capital market for the financing of rolling stock (wagons and coaches). IRFC leases out
rolling stock to IR and collects lease rentals from it in advance, at half-yearly intervals. An annual lease
agreement, structured to ensure that IRFC’s expenses (mainly cost of borrowing) are covered, backs this
arrangement and allows IRFC to earn adequate margin.
For 2011-12, IRFC’s unaudited results indicate a total income (net of interest expenditure and lease rentals
paid) of Rs.10.2 billion and a net profit of Rs.4.8 billion; the company reported a total income (net of interest
expenditure and lease rentals) of Rs.6.0 billion and a net profit of Rs.4.8 billion for 2010-11
Term Sheet of 6.70% IRFC Tax Free NCD
Issuer
Instrument
Credit Rating
Coupon
Face Value
Redemption Price
Coupon Payment
Date
Tenor/Maturity
Redemption Date
Objects
of
the
Issue
Security
Registrars
Trustees
Listing
Depository
Indian Railway Finance Corporation Limited
Secured, Tax Free, Redeemable, Non-convertible, Non-cumulative Railway
Bonds
in the nature of promissory notes
“AAA/Stable by CRISIL, “CARE AAA” and LAAA by ICRA
6.70% semi annual
Rs. 10,00,000 per Debenture
INR 10,00,000 (Rupees Ten Lakhs only) per Debenture and accrued interest
thereon.
15th April & 15th October every year and first interest payment on 15th April
2010
and the last interest payment on due date of redemption
10 Years
March 8, 2020
The proceeds of the Bond issue(s) will be used for the acquisition of Rolling
Stock (Railway assets) to meet the developmental needs of the Ministry of
Railways
Pari-Passu first charge over the rolling stock assets of the Company
Karvy Computershare Private Limited
Indian Bank
Listed on the Wholesale Debt Market segment (WDM) of the National Stock
Exchange (NSE).
NSDL & CSDL