IRFC Loan Agreement: IRFC Expands Financial Horizons with ₹5,000 Crore Loan to NTPC for Infrastructure Development, ET Infra
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State-owned Indian Railway Finance Corporation Ltd (IRFC), the financing arm of the Indian Railways, has signed a ₹5,000 crore loan agreement with NTPC Ltd to support the energy giant's capacity expansion, in a first such deal outside the traditional railway rolling stock financing as it diversifies into other areas of infrastructure funding.The scope of work of IRFC is "much broader now than just financing the railway rolling stock" following a fresh interpretation of the Articles of Association, said a source.The Articles of Association outline the rules and regulations governing a company's internal operations and management and define how various tasks are carried out within the organisation.'Funding backward and forward linkages related to Indian Railways will be the focus for IRFC,' he added.'IRFC will finance forward linkages such as ports, power plants, coal mines, rail lines linking a port to the Dedicated Freight Corridor (DFC) etc,' the source said.Mumbai-listed IRFC, a navratna public sector enterprise, started to look at diversifying into other areas of infrastructure financing after the Indian Railways began getting majority of the funds for rolling stock procurement through Gross Budgetary Support or GBS some 2-3 years ago, which was previously funded through IRFC.'So, IRFC had to look for diversification,' the source said.The deal with NTPC is 'just the beginning', there are many more such transactions in the offing, he said.IRFC, he said, will not finance assets that are rated below AA.'That's the main criteria. We don't have any problem in financing assets which are being constructed by Maharatna PSU's like NTPC. But, we will not fund less rated assets; that's the stand we'll take generally,' the source said.The deal with NTPC is the kind of backward linkage that IRFC is looking at.NTPC is building renewable power plants from which power will be supplied to Indian Railways to meet its target of reaching net zero by 2030.'Those power projects of NTPC which are into renewables are being funded by IRFC because it is having a backward linkage with railways. Because railways' energy is coming from NTPC, so NTPC's project is now eligible for being funded through IRFC,' the source said.IRFC will likely price loans for funding forward and backward linkages below the rates offered by PFC and REC, the source said.'IRFC is trying to mobilise funds as cheap as possible and pump it into the infrastructure sector with the least margins as well because at the end of the day, infrastructure investment has to be made cheaper by reducing the financing rates,' the source said.In May, IRFC raised ₹3,000 crore from the domestic debt market through bonds maturing in five years at a record low rate of 6.65 per cent.
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