Indian Railways Finance Corp (IRFC) is set to raise $1.1 billion (about 130 billion yen, or Rs 8,440 crore) through a yen-denominated syndicated offshore loan, three people familiar with the matter told ET.

Japanese lenders Mizuho Bank, MUFG and Sumitomo Mitsui Banking Corp (SMBC) are likely to sign an agreement for the loan around Japanese Prime Minister Fumio Kishida’s India visit this week.

The proceeds would be used to finance the green initiatives of Indian Railways, like electrification of its tracks and addition of electric locos.

IRFC managing director Amitabh Banerjee confirmed the plan.

“Drawdowns would happen at the appropriate time. The tranches would be decided later,” he said in a texted reply to ET’s questions. “Syndication is expected to be completed during Q1 of FY23.”

MUFG and SMBC did not reply to ET’s queries. Mizuho could not be contacted immediately.

The loan may be raised in two tranches: a seven-year loan of $400 million and $700 million for 10 years, the people in the know said.

“Many Indian companies have delayed their offshore fundraising due to escalated geopolitical tensions. It is now resuming,” one of them said.

IRFC’s Banerjee, however, declined any such delay.

The loans will be priced after adding a spread, or mark-up, over the Tokyo Overnight Average Rate (TONA), a Japanese benchmark rate gauge, which yields close to zero. The spreads are expected in the range of 98-110 basis points across two maturities.

In January, the financier to Indian railways had mopped up $500 million via offshore bonds, marked as green. Those were listed at the Gujarat International Finance Tec-City.

The Indian Railways is reportedly working towards becoming the largest green railway in the world. It is aiming to attain the tag of “net zero carbon emitter” before 2030, in line with the government’s increasing focus on the subject. The steps range from electrification, water and paper conservation and saving animals from being injured on railway tracks.

The Indian Railways has also drawn up a Rs 34,000 crore safety upgrade of its network that involves deployment of an automatic train protection system called Kavach.

IRFC, being the official financier to the national carrier, is expected to play a crucial funding role in these projects.

Meanwhile, India’s association with Japan is on the rise.

Since 2016, India’s exports to Japan nearly doubled, to $6.07 billion in 2021, show data compiled by Bank of Baroda. During the same period, imports grew 46% to $14.4 billion.

Kishida will be the first global leader to visit India since the Russian invasion of Ukraine, ET reported on March 7. The annual summit would push fresh investments and would be an opportunity to give momentum to the bilateral partnership. The India-Japan annual summit is expected to push fresh investments, giving further momentum to the bilateral partnership.

Indian entities are increasingly diversifying their funding sources. The country’s largest lender, State Bank of India, became the first local lender selling ‘Formosa’ bonds in Taiwan about six weeks ago.