Saturday May 17, 02:28 AM
Crisil 'AAA' for IRFC's Rs 7,200-cr bonds issue
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Crisil has assigned 'AAA' for Indian Railway Finance Corporation Ltd's (IRFC) Rs 7200 crore bonds issue. Crisil's ratings on IRFC bond issues continue to be based on the support that IRFC receives from the Government of India (GoI) on account of its status as the financing arm of Indian Railways. Railways, which function under the ministry of railways (MoR), constitute a crucial part of the country's infrastructure; hence, IRFC plays a strategic role in GoI's transport policy. Its ownership by GoI and favourable lease agreements with the Indian Railways endorse this. These agreements protect IRFC's net interest margins and transfer the interest and foreign exchange risks on its borrowings to the Indian Railways. IRFC's strong capital adequacy and asset quality, and its ability to raise long-term funds at competitive rates, support the ratings. Crisil release said that it believes that IRFC would continue to derive business support from GoI, on account of the strategic role that IRFC plays in channeling finance to Indian Railways. Support from GoI ensures that IRFC would retain its strong credit risk profile. The outlook may be revised to 'Negative' if there is a significant dip in GoI ownership.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, coaches, and the like). IRFC leases rolling stock to the Indian Railways and collects lease rentals from it in advance, at half-yearly intervals. An annual lease agreement, structured to ensure that IRFC's expenses (mainly costs of borrowing) are reimbursed, backs this arrangement and allows IRFC to earn a comfortable margin.
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