IRFC sells Rs 41 billion, 30-yr bond to LIC at 6.77% semi-annual rate

Indian Railway Finance Corp Ltd has sold bonds worth 41 bn rupees to Life Insurance Corp of India at a semi-annualised coupon of 6.77%, a source privy to the development told Cogencis on Friday. This is the third tranche of IRFC's planned 1.5-trln-rupee borrowing from LIC for five years started October 2015. IRFC's borrowing from the state-owned insurance company is for a period of 30 years, with a five-year moratorium on interest payment and a 10year moratorium on principal payment. The coupon is currently 30 basis points above the 10-day average yield on the benchmark 6.79%, 2027 government bond. The bonds have a staggered redemption from the 11th year till maturity, with a coupon reset option after the 10th and the 20th years. After the 10th and the 20th years, the coupon will be reset to 30 bps above the 10-day average yield on the corresponding 10-year gilt then. The second tranche of the arrangement between IRFC and LIC took place

in April 2016, when the former had borrowed around 70 bln rupees through 30-year bonds at a semi-annualised coupon of 8.02%.

The first tranche of the bonds worth 30 bn rupees was placed in October 2015, when IRFC sold 20-year bonds to LIC at a semi-annualised coupon of 7.87%.

In March 2015, the Ministry of Railways and LIC had signed a memorandum of understanding for a 1.5-trlnrupee loan over the next five years to fund long-term railway projects. The borrowing is being routed through IRFC, a dedicated financing arm of the Ministry of Railways. This borrowing from LIC is in addition to IRFC's normal market borrowing.