IRFC shares rally 6% after government nod for Rs 10,000 crore deep-discount bond issue

Shares of Indian Railway Finance Corporation climbed as much as 6.4% on Friday to Rs 138.50 on the BSE after reports that the company secured government approval to raise up to Rs 10,000 crore through deep-discount bonds.

The planned issuance is part of a broader shift in the funding strategy of state-run enterprises amid evolving investor appetite and changing infrastructure financing dynamics, according to a Reuters report.

The finance arm of Indian Railways received clearance to raise funds via zero-coupon, deep-discount bonds with a 10-year maturity, according to a publicly available government document dated May 14. The issuance, which must be completed by the end of March 2027, will be offered at a discount of Rs 4,916 crore to face value.

Deep-discount bonds are typically issued at a significant markdown and do not pay periodic interest. Instead, investors receive the full face value at maturity, providing returns through capital appreciation. The structure, similar to zero-coupon bonds, eliminates reinvestment risk and has recently gained traction among state-owned firms.

Growing trend among PSUs

IRFC is the third state-run company to receive such approval in the past three months, following Housing and Urban Development Corp (HUDCO) and Power Finance Corp (PFC). However, PFC had to scrap its deep-discount bond plan after facing weak investor interest and poor pricing.

The approval for IRFC's bond issuance comes amid a broader move by public sector undertakings to diversify their funding sources. At least six state-run companies have sought permission for similar offerings, signaling increased experimentation with alternative debt instruments.

Strategic shift beyond railways

Traditionally the primary financier of railway projects, IRFC has seen reduced reliance from Indian Railways in recent years. For FY26, over 96% of the railways’ Rs 2.62 lakh crore capital expenditure is being covered through gross budgetary support (GBS), drastically cutting IRFC's role in railway funding.

In response, the company has pivoted to financing infrastructure projects in other sectors starting FY25. In March, IRFC announced funding for two major power sector projects — a Rs 3,200 crore loan to Patratu Vidyut Utpadan Nigam Limited and a Rs 7,500 crore rupee term loan to NTPC Renewable Energy.

Stock performance and technicals

IRFC shares have gained 16% over the past week, 7.7% in the past month, and 13.5% in the last three months, though they remain down 11% over the past year.

On the technical front, the stock is trading above seven of its eight key simple moving averages but remains below its 200-day SMA. The 14-day Relative Strength Index (RSI) stands at 57.2, indicating neutral momentum.

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