The Rs 4,633-crore Indian Railway Finance Corporation (IRFC) initial public offer opened today for subscription, in the price band of Rs 25-26 apiece.
IRFC is the first public issue by a railway non-banking financial company (NBFC).
The Rs 4,633-crore Indian Railway Finance Corporation (IRFC) initial public offer opened today for subscription, in the price band of Rs 25-26 apiece. The dedicated market borrowing arm of the Indian Railways has allocated 53.45 crore equity shares at Rs 26 per share on Friday to anchor investors. The grey market premium of IRFC has fallen to Rs 1.25-1.30 today from Rs 1.60 on Friday. Since it is concerned with railway financing, most of the analysts and brokerages have recommended to ‘subscribe’ this issue during the three-day IPO process, which will close for subscription on January 20, 2021.
Vishal Wagh, Head of Research, Bonanza Portfolio Ltd, told Financial Express Online that the extensive expansion plans of the Indian Railways in the future will involve significant financing and as IRFC is a primary financing source for the Indian Railways, the operation of IRFC will increase significantly.
AR Ramachandran, Co-founder & Trainer, Tips2Trade, told Financial Express Online that IRFC has relatively strong fundamentals. It is an attractively priced IPO with current primary market frenzy in India which makes it a subscribe for short term investors looking for listing gains. “Long term investors, however, are advised to buy only on a dip post IPO as currently the overall market and especially the PSU stocks look technically overbought and due for a sharp correction,” he added.
IRFC is the first initial public offer in the calendar year 2021 and the first public issue by a railway non-banking financial company (NBFC). One can bid for IRFC IPO in a lot size of 575 shares, translating to Rs 14,950 per lot. Through the initial public offer, the President of India, the promoter of IRFC, will offload 13.6 per cent stake in the company, bringing the promoter shareholding to 86.4 per cent post-issue. “When it comes to the Railways, we come across sound management, government organization and bigger scope to grow,” Wagh added while recommending to ‘subscribe’ for listing gains and as well as for a longer-term portfolio holding.
IRFC IPO Valuation
Analysts at Anand Rathi Financial Services have also given a ‘subscribe’ rating to IRFC as at the upper end of the IPO price band, it is offered at 8x its TTM earnings & at 0.97x P/B. “We believe the company is reasonably valued at current valuation and enjoys high creditworthiness. However, it is highly dependent on Indian Railways’ capex plans,” analysts added. The IPO note of the brokerage also added that the Government of India has undertaken various policy interventions in order to liberalise the Railways including development of freight corridors, high speed railway and elevated corridors.
Those at Angel Broking have also recommended to ‘subscribe’ as they expect the company to post strong growth driven by capex by Indian railways along with stable margins due to cost plus model.