Indian Railway Finance Corporation (IRFC) is set to launch bonds, aiming to raise Rs 3,000 crore, which includes a Rs 2,500-crore greenshoe option. The maturity date for these bonds is November 11, 2026.
A greenshoe option, also known as an overallotment option, is a provision that allows the underwriters of financial security, which can be stocks or bonds the case may be to issue more shares or bonds than originally planned by the issuer.
As said, the Indian Railway Finance Corporation (IRFC) in this case, decides to issue bonds, which may include a greenshoe option. This option shall give the underwriters (the financial institutions responsible for selling the bonds to investors) the ability to sell additional bonds beyond the initially planned amount, usually up to a certain percentage of the original offering. This provides price stability, liquidity, and buying power for the security issue.
Key Highlights: IRFC Capital Gain Bonds
- IRFC to raise Rs 3,000 crore through bonds, including a Rs 2,500-crore greenshoe.
- Bidding for IRFC bonds on November 22; maturity set for November 11, 2026.
- CRISIL, ICRA, and CARE assign ‘AAA’ ratings to IRFC bonds, indicating high creditworthiness.
- NABARD and SIDBI to issue bonds, with NABARD aiming for Rs 5,000 crore.
- SIDBI’s and NABARD’s bonds carry ‘AAA’ ratings from CRISIL, CARE, ICRA, and India Ratings.
About IRFC
IRFC, or Indian Railway Finance Corporation, is a public sector enterprise that provides financial resources for the expansion and running of the Indian Railways. IRFC was established in 1986 and is under the administrative control of the Ministry of Railways.
IRFC raises funds from domestic and overseas markets through various instruments, such as bonds, loans, leases, and borrowings. IRFC also funds various railway infrastructure projects, such as freight wagons, passenger coaches, locomotives, and electrification. It also became a listed company in 2021 after its successful initial public offering.
IRFC Bonds: Bidding and Exchange Details
The electronic bidding platform of the National Stock Exchange of India will host the bond bidding on November 22, between 10 am and 11 am. Investors participating in the bidding should mark November 24 on their calendars, as it is the pay-in date for the exchange of bonds and funds between the issuer and the investor.
Top Ratings from CRISIL, ICRA, and CARE
Receiving top-notch credit ratings, these bonds have been rated ‘AAA’ by CRISIL, ICRA, and CARE. This solidifies IRFC’s position in the market, assuring investors of the bonds’ high creditworthiness.
NABARD and SIDBI Join the Bond Issuance Wave
Adding to the financial landscape, NABARD and SIDBI have also announced plans to issue bonds. NABARD aims to raise Rs 5,000 crore, including Rs 3,000 crore, through bonds maturing in three years and one month.
SIDBI’s and NABARD’s Bond Offerings
SIDBI and NABARD’s bond bidding is scheduled for November 22 on the BSE and NSE. SIDBI plans to raise up to Rs 5,000 crore, with Rs 3,000 crore through bonds maturing in five years or on November 24, 2028.
High Credit Ratings for SIDBI and NABARD Bonds
Ensuring investor confidence, SIDBI’s bonds have been rated ‘AAA’ by CRISIL and CARE, while NABARD’s bonds received ‘AAA’ ratings from ICRA and India Ratings. This further underlines the strong financial standing of these institutions.
Understanding the Credit Ratings
In India, various credit rating agencies utilise distinct scales to assess creditworthiness. Here’s a comparison of credit rating scales from prominent agencies:
| Credit Rating Scale | ICRA | CRISIL | CARE | India Rating and Research | ACUITE |
| Highest Safety | ICRA AAA | CRISIL AAA | CARE AAA | IND AAA | ACUITE AAA |
| High Safety | ICRA AA | CRISIL AA | CARE AA | IND AA | ACUITE AA |
| Low risk | ICRA A | CRISIL A | CARE A | IND A | ACUITE A |
| Moderate credit risk | ICRA BBB | CRISIL BBB | CARE BBB | IND BBB | ACUITE BBB |
| Moderate default risk | ICRA BB | CRISIL BB | CARE BB | IND BB | ACUITE BB |
| High default risk | ICRA B | CRISIL B | CARE B | IND B | ACUITE B |
| Very high risk | ICRA C | CRISIL C | CARE C | IND C | ACUITE C |
| Defaulted | ICRA D | CRISIL D | CARE D | IND D | ACUITE D |
Why Are Bond Ratings Crucial For Investors
Well-known credit ratings companies like ICRA, CRISIL, CARE, India Rating and Research, and ACUITE carefully evaluate the financial history and ability to repay debt when assigning credit ratings.
- Bond ratings are essential for investors as they provide a standardised measure of the credit risk associated with a bond issue.
- These ratings enable investors to compare risk and return, diversify their portfolios, and make well-thought-out investment decisions based on their risk tolerance and goals.
- Bond ratings also impact bond yield and pricing, with lower-rated bonds generally offering higher yields to offset increased risk.
- Given the dynamic nature of financial conditions, bond ratings change over time,. Thus, investors should regularly monitor and adjust their portfolios accordingly.
Conclusion
Indian Railway Finance Corporation (IRFC) is set to raise Rs 3,000 crore through bonds, with a greenshoe option of Rs 2,500 crore, maturing on November 11, 2026. The successful AAA ratings from CRISIL, ICRA, and CARE underline investor confidence. With broader investment opportunities, NABARD and SIDBI also plan significant bond issuances in parallel, contributing to the dynamic bond investment landscape.
Source- moneycontrol.com
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.