The Indian Railway Finance Corporation (IRFC) is embarking on a strategic move to refinance high-interest multilateral loans for railway projects. This move comes as part of IRFC’s efforts to optimize its financial strategy and explore more favorable lending conditions. By replacing existing debt with new debt at different interest rates and repayment terms, IRFC aims to reduce its financial burden and enhance lending margins.
The World Bank and Asian Development Bank (ABD) have been instrumental in funding major railway projects in India, including the two Dedicated Freight Corridors – Eastern and Western, as well as the Delhi – Meerut RRTS projects. IRFC officials have indicated that refinancing options are being actively considered for loans extended by these multilateral institutions. While public-private partnerships (PPPs) are excluded from the refinancing plan, other companies, Special Purpose Vehicles (SPVs), and Joint Ventures (JVs) within the railway ecosystem are potential candidates for this financial restructuring.
“We are still considering options to refinance loans at lower rates and more favorable conditions, especially those funded by multilateral institutions,” a source from IRFC shared. The aim is to secure better borrowing terms for railway projects without compromising financial sustainability. The proposal is currently under discussion, with a focus on reducing forex outflows and enhancing lending margins for IRFC.
IRFC’s top management has emphasized the importance of exploring diverse funding avenues, including the 54EC bond market, zero coupon bonds, domestic bond markets, and opportunities in the External Commercial Borrowing (ECB) market. Manoj Kumar Dubey, CMD of IRFC, highlighted the company’s commitment to recalibrating growth plans to ensure steady Asset Under Management (AUM) figures. With railway business constituting almost 99% of its AUM, IRFC is keen on harnessing better deals and margins in the upcoming quarters.
Having financed railway infrastructure projects amounting to ₹550,000 crore over the years, IRFC has played a pivotal role in supporting the growth of India’s railway network. The company’s core business involves raising funds from domestic and international markets to finance rolling stock acquisitions, leasing assets to the transporter, and supporting project assets. As Indian Railways has refrained from seeking fresh funding from IRFC since FY24 to alleviate its indirect debt burden, IRFC has been compelled to diversify its business model and explore new avenues for revenue generation.
“Our intent is to expand beyond our traditional leasing model to Indian Railways,” shared Dubey, underlining IRFC’s commitment to adapt to evolving financial landscapes and drive sustainable growth. As the railway sector continues to evolve and expand, IRFC remains steadfast in its mission to navigate financial challenges, secure favorable lending terms, and drive innovation in the realm of railway project financing.
