By Khushi Malhotra
MUMBAI (Reuters) -India’s Railway Finance Corp (IRFC) has received government approval to raise up to 100 billion rupees ($1.17 billion) through deep-discount bonds, a corporate bond structure that is gaining popularity among state-run firms.
Deep-discount bonds are generally issued at a discount to their face value and do not pay regular interest, a feature similar to zero-coupon notes that removes re-investment risks. Instead, the bonds are redeemed at face value at maturity, giving investors their return on investment.
IRFC has till end of March 2027 to raise funds via the deep-discount zero coupon bond with a 10-year maturity, a publicly available government document dated May 14 showed. The bond will be issued at a discount of 49.16 billion rupees.
IRFC did not reply to a Reuters email seeking comment.
At least six Indian state-run companies have sought government approval to issue deep-discount bonds, with IRFC becoming the third entity after Housing and Urban Development Corp (HUDCO) and Power Finance Corp (PFC) to receive approval in the last three months.
PFC, however, was forced to shelve its plan to raise funds through deep-discount bonds after weak investor appetite led to unattractive pricing, according to merchant bankers.
($1 = 85.5850 Indian rupees)
(Reporting by Khushi Malhotra; Editing by Janane Venkatraman)
