IRFC IPO: India’s 1st PSU NBFC issue opens Monday, grey market premium weak; should you subscribe?

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Updated: Jan 15, 2021 11:58 AM

The Rs 4,633-crore Indian Railway Finance Corporation (IRFC) initial public offer (IPO) is set to open for subscription on Monday, January 18, 2021, in the price band of Rs 25-26 apiece.

IRFC, IRFC IPO, initial public offerIRFC 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 (IPO) is set to open for subscription on Monday, January 18, 2021, in the price band of Rs 25-26 apiece. At the upper end of the price band, IRFC would raise Rs 4,633 crore, and at the lower end, Rs 4,455 crore. The anchor book will open today (Friday, January 15, 2021) and will be allocated up to 60 per cent of the portion reserved for QIBs, to build investor confidence on the IPO. This is for the first time that a PSU enterprise is using the anchor-investor route. In the grey market, IRFC shares were seen trading with a muted premium of Rs 1.60 apiece over the issue price. This is the first public issue by a railway non-banking financial company (NBFC).

Also read: IRFC IPO: First IPO of new year 2021 opens Jan 18; check price band, grey market premium, details

5th railway company to list

Up to 50 pe rcent of the net offer will be reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional buyers and remaining 35 per cent for retail investors. Earlier in April 2017, the Union Cabinet had approved the listing of five railway companies. Out of which IRCON International Ltd, RITES Ltd, Rail Vikas Nigam Ltd (RVNL) and Indian Railway Catering and Tourism Corporation (IRCTC) have already been listed. IRCTC shares were listed in October 2019 with over 100 per cent listing gains. While RVNL shares got listed in April 2019, and made a flat debut on stock exchanges. Shares of IRCON International Ltd were listed on the bourses in September 2018, with a 14 per cent discount to its IPO price.

Should you subscribe to the IRFC IPO?

Likhita Chepa, Senior Research Analyst at CapitalVia Global Research, told Financial Express Online, that it has a unique business model and hence its valuations can not be compared to any benchmark. Considering its financials and prospects, the issue seems to be an undervalued offering. However, if the government or MoR changes its policies regarding IRFC, then its profitability can get affected. As the primary market has been awarding investors with a fair amount of listing gains in recent times, this issue is also expected to draw a significant amount of investors’ interest. “The strong fundamental aspects are making it a good bet for not just listing gains but also for long-term investment,” she said.

Abhay Doshi, Founder, UnlistedArena.com – dealing in Pre-IPO & Unlisted Shares – told Financial Express Online that the issue price of IRFC looks quite attractive. “Although the size of the issue is quite big and dates of IRFC IPO will clash with Indigo Paint IPO, we may not see huge oversubscription and stellar listing gains like recent IPOs hence, investors with a medium to long term view may find it suitable,” Doshi added.

Most of the brokerages have recommended to ‘subscribe’ to the issue.”GEPL Capital has recommended to ‘subscribe’ to the issue for the long-term on the back of the relatively low-risk business model, strategic role in financing growth of Indian Railways and long term prospects considering electrification and network expansion. The offer is valued at a one time FY20 price to book value.

Those at LKP Securities have also given ‘subscribe’ rating to the dedicated market borrowing arm of the Indian Railways. “Attractive valuation with healthy return ratios make us optimistic on the long term prospects for IRFC,” it said.

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