The government will offload up to 2% of its stake in Indian Railway Finance Corporation through the offer-for-sale route over two days starting Tuesday, as it works to meet minimum public shareholding norms for the state-run lender.
What is the IRFC offer-for-sale (OFS)?
The Ministry of Railways, acting as promoter through the President of India, will sell up to 13,06,85,060 equity shares, or 1% of IRFC’s total paid-up equity capital, as the base offer size. This comes with an option to sell an additional 1% through an oversubscription clause, taking the total potential dilution to 2% of the company’s issued and paid-up equity capital.
The floor price for the offer has been fixed at Rs 91 per share, according to a notice issued by the Railway Board. There is no discount on offer for retail investors or employees of the company.
What is the timeline for the IRFC OFS?
According to the notification, the sale will run across two trading sessions. On the first day, only non-retail investors can place bids, between 9:15 am and 3:30 pm. These investors will have the option to carry forward any unallotted bids to the second day.
The second session, the following day, will be open to retail investors, employees and those non-retail investors who chose to carry forward unallotted bids from day one. Trading on both days will run during normal market hours.
Separately, the company may offer up to 25,000 equity shares, about 0.0002% of total paid-up capital, to eligible employees, subject to regulatory approval. Employees can apply for shares worth up to Rs 5,00,000 each, bidding only at the cut-off price.
How will shares be allocated in the IRFC OFS?
At least a quarter of the shares on offer have been reserved for mutual funds and insurance companies, subject to valid bids being received at or above the floor price. No single bidder, other than these two categories, can be allotted more than 25% of the offer shares.
Retail investors, defined as those bidding up to Rs 2,00,000 in aggregate across exchanges, have been allotted 10% of the offer shares, subject to valid bids. They can bid at any price above the floor price or opt for the cut-off price mechanism. Any portion left unsubscribed in the retail category will be made available to non-retail investors carrying forward bids to the second day.
In the non-retail category, allocation will follow a price-priority basis across multiple clearing prices. If bids at a particular clearing price exceed the shares available, allotment will be done proportionately.
Why is the government selling its stake in IRFC?
The sale is being conducted to help the railway financing arm meet the minimum public shareholding requirement of 25%, as mandated under the Securities Contracts (Regulation) Rules and SEBI’s listing regulations. IRFC, which raises funds for the Railways’ rolling stock and infrastructure needs, is among a clutch of public sector companies where the government holding remains above the threshold prescribed for listed entities.
The notice cautioned that promoters and members of the promoter group will not be permitted to participate in the offer, and any such bids would be rejected. It also noted that the sale is being made under exemptions from US securities registration requirements, and is not intended for distribution within the United States except to qualified institutional buyers.
About IRFC
The Indian Railway Finance Corporation (IRFC) is the dedicated financing arm of the Ministry of Railways, responsible for raising funds from domestic and international markets to support the acquisition of rolling stock and the development of railway infrastructure. The Government of India remains the majority shareholder in the listed public sector enterprise, which functions under the administrative control of the Ministry of Railways.