IRFC Secures $300 Million ECB from Japan's SMBC, Marks Return to Global Market

IRFC Secures $300 Million ECB from Japan's SMBC, Marks Return to Global Market

Indian Railway Finance Corporation (IRFC) has secured a $300 million External Commercial Borrowing (ECB) loan from Japan's Sumitomo Mitsui Banking Corporation (SMBC), marking its return to the global financial market after over three years. The loan, denominated in Japanese Yen equivalent to $300 million, carries a five-year tenor with bullet repayment and is benchmarked to the Tokyo Overnight Average Rate (TONAR). This strategic funding will support IRFC’s financing of projects linked to the railway sector, including metro rail, renewable energy, and dedicated freight corridors under its IRFC 2.0 plan.

Manoj Kumar Dubey, Chairman and Managing Director & CEO of IRFC, emphasized that tapping into the international borrowing market at competitive rates helps reduce the weighted average borrowing cost while reviving IRFC's presence in global capital markets. The ECB loan aligns with IRFC’s broader strategy to diversify its funding sources and optimize its capital structure for strengthening India’s railway infrastructure, a vital role in nation-building. The proceeds will be prudently deployed in compliance with RBI’s ECB guidelines for projects that have forward and backward linkages with the railway sector.

This development signals IRFC's renewed access to international financial markets, improving funding diversity and offering potential for future overseas collaborations. With a stable balance sheet featuring total assets of ₹4.88 lakh crore and equity of ₹52,668 crore, IRFC is well-positioned to support large-scale infrastructure growth across India’s rail network. The return to the ECB market enhances IRFC’s financial toolkit and underscores confidence from global lenders such as SMBC in IRFC’s creditworthiness and strategic direction.

The $300 million loan stands as a milestone in IRFC’s financial strategy, enabling the financing of projects crucial to modernizing and expanding India’s transport infrastructure with international support.

IRFC $300M ECB Facility Terms

Indian Railway Finance Corporation (IRFC) secured a $300 million External Commercial Borrowing (ECB) from Sumitomo Mitsui Banking Corporation (SMBC) with a 5-year tenor, bullet repayment structure at maturity, and interest benchmarked to Tokyo Overnight Average Rate (TONAR) plus a spread. The facility, denominated in Japanese Yen equivalent, was routed through SMBC's GIFT City branch, marking IRFC's first ECB in over three years and complying with RBI guidelines for eligible railway-linked projects.​

Key Structural Terms

• Amount: USD 300 million (JPY equivalent).

• Tenor: 5 years from drawdown date.

• Repayment: Bullet (principal repaid in full at end of tenor).

• Interest Rate: TONAR + undisclosed spread (competitive vs domestic rates, aiding cost optimization).

• Currency: JPY, hedged for forex risk under RBI ECB framework.

• Purpose: On-lending to railway sector projects (metro, renewables, freight corridors).​

Covenants and Conditions

Standard RBI-mandated ECB covenants apply, including end-use restrictions to infrastructure, minimum average maturity of 3 years (met here), and all-in-cost ceiling (typically SOFR + 500 bps for FCY ECBs). No public disclosure of bespoke financial covenants like debt service coverage or leverage ratios, but IRFC's sovereign guarantee and 86% government ownership provide comfort. Reporting under SEBI LODR includes quarterly utilization certificates.​

Detailed covenants remain undisclosed in public filings beyond RBI/SEBI compliance; refer to IRFC's exchange disclosures or RBI master directions for standard terms. This facility lowers IRFC's borrowing costs and diversifies funding amid rail capex surge.