IRCON International IPO for Rs 467 crore opens today: 5 key things to know

By: | Published: September 17, 2018 10:47 AM

IRCON International IPO: State-run railway firm IRCON international has come out with its public offer, in which the government looks to raise up to Rs 467 crore. We take a closer look.

IRCON International has set a price band of Rs 470-475 for its IPO.

IRCON International IPO: State-run railway firm IRCON international has come out with its public offer, in which the government looks to raise up to Rs 467 crore. Notably, IRCON is involved in engineering and construction businesses. The company receives nearly 87% of its orders from the Ministry of Railways. IRCON provides EPC services on a fixed-sum turnkey basis as well as on an item-rate basis for various infrastructure projects. Even as investors mull whether to subscribe to IRCON International IPO, we take closer look at 5 important details, and what brokerages have to say.

Issue details

In the IRCON IPO, 99.1 lakh shares are on offer. The firm has set a price band of Rs 470-475. The issue will remain open till September 19th. IRCON International is offering a 10% discount to retail investors and eligible employees. The IPO is part of the government’s divestment programme for the year.

Financials

As of March 31, 2018 IRCON’s net worth stood at about Rs 3,762 crore. The cash balance was at about Rs 1,200 crore. In FY18, IRCON has acquired debt of Rs 3,203 crore from the Indian Railway Finance Corporation at interest rate of 8.77%, to pay upfront lease premium to Rail Land Development Authority (RLDA) for the acquisition of a project site.

Strengths

Brokerages point out that the firm has a strong order book (Rs 22,406.8 crore as of March 2018), excellent execution track record, healthy financials, and enough cash to meet working capital needs.

Credit profile

According to a report by HEM Securities, IRCON International has a strong credit profile that includes non-fund based standby bank limits of Rs 3,120 crore out of which Rs 1,665 crore has been utilised. “According to CARE, company’s credit rating for long and short term borrowing has been maintained at AAA/A+ since 2011,” noted the research and brokerage firm.

Valuations

According to Motilal Oswal, investors can subscribe to the issue for listing gains. The IPO valuation appears decent, given the order book position and financials. “Ircon is trying to improve international business and is planning to diversify to aid growth,” the firm noted. The firm is bringing the issue at p/e multiple of approximately 10.86 on annualized post issue FY18 eps at price band of Rs 470-475/share. “Company’s business operates in diverse sectors covering many countries have excellent execution track record through strong operating systems and controls. Company’s order book is robust which gives strong revenue visibility and steady execution. Looking after all above we recommend “Subscribe” on issue,” HEM Securities said in a note.

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