**IRFC Joins PFC and Sidbi in Withdrawing Bond Issues Amid Market Pressures**
Indian Railway Finance Corp Ltd (IRFC) has become the third public sector entity to withdraw a bond issue in just one week, following similar actions by Power Finance Corp (PFC) and the Small Industries Development Bank of India (Sidbi). The decision to retract its plans to raise up to ₹5,000 crore through zero-coupon bonds (ZCBs) was influenced by a lack of investor interest in the proposed pricing, as reported by three merchant bankers.
IRFC had aimed to issue zero-coupon bonds maturing in 10 years but received bids totaling over ₹4,461 crore, with yields ranging from 6.63% to 7.23%. The company had anticipated a coupon rate of approximately 6.8%, with a cut-off yield expected between 7.23% and 7.25%. This withdrawal follows PFC’s cancellation of its plan to raise up to ₹3,500 crore through 15-year bonds and Sidbi’s decision to retract its proposal for up to ₹8,000 crore in bonds maturing in November 2029, both due to unfavorable pricing.
Market analysts suggest that these withdrawals reflect broader market pressures rather than specific concerns about the issuers. Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincap LLP, noted that factors such as rupee depreciation, ongoing global uncertainties, subdued foreign portfolio inflows, and a continuous stream of long-term government borrowing have collectively exerted pressure on the yield curve. He emphasized that IRFC’s choice to withdraw was a demonstration of market discipline, as accepting significantly higher yields could have jeopardized the credibility of previous issuances and unsettled current investors.
Zero-coupon bonds, which are sold at a discount of over 20% from their face value, had received special government approval for IRFC to issue up to ₹10,000 crore in May. To date, IRFC has successfully raised ₹2,982 crore through ZCBs maturing in 10 years at a cut-off yield of 6.8%, which is lower than the initial target of ₹4,000 crore for that tranche.
In summary, the recent bond market activity involving IRFC, PFC, and Sidbi serves as a reminder that market sentiment can often overshadow monetary policy signals, highlighting the complexities of the current financial landscape.
**FAQ**
**Why did IRFC withdraw its bond issue?**
IRFC withdrew its bond issue due to limited investor interest in the proposed pricing, which did not meet their expectations for acceptable yields.