RITES IPO opens today: The state-owned railways consultancy firm Rail India Technical and Economic Services (RITES) opens its initial public offering for subscription today making its the first public sector unit IPO of FY19. It will also be the first divestment exercise by the government this fiscal. The government that owns 100 percent stake in the company that is a leading player in the transport consultancy and engineering sector in the country and aims to raise Rs 466.2 crore at the upper end of the price band of the offer.
The IPO will be launched with a price band of Rs 180-185 per share, according to DRHP. The equity shares are proposed to be listed on both BSE and NSE. The issue closes on June 22.
About the offer
RITES IPO will be launched with a price band of Rs 180-185 per share with a face value of Rs 10. The is no fresh issuance of shares, but OFS (offer for sale) of 2.52 crore shares. The retail discount and employee discount is Rs 6 per equity share on offer price. The floor price is 18.0 times the face value of the equity shares and the cap price is 18.5 times the face value of equity shares.
The bids can be made for a minimum of 80 equity shares and in multiples of 80 equity shares thereafter. 0.12 crore shares are reserved for eligible employees. The promoter (government) owns 100 percent stake in the company. The shareholding of the promoter will reduce to 87.4 percent after listing. The paid-up share capital of RITES currently stands at Rs 200 crore. The company will not receive any proceeds from the offer and all the proceeds will go to the selling shareholder.
Elara Capital India, IDFC Bank, IDBI Capital Markets & Securities and SBI Capital Markets.
1) To disinvest 24,000,000 equity shares held by the selling shareholder in the company, equivalent to 12 percent of the issued, subscribed and paid up equity share capital of the company as part of the net offer, and such equity shares that may be reserved for employee reservation portion, if any, subject to necessary approvals.
2) To achieve the benefits of listing the equity shares on the stock exchanges. Further, company expects that listing of the equity shares will enhance visibility and brand image and provide liquidity to its shareholders. Listing will also provide a public market for the equity shares in India.
The company reported a 9.1 percent CAGR increase in total operating revenue over fiscal year 2013-17 to Rs 1,353.36 crore In fiscal year 2017. The consulting business surged by 10.2 percent CAGR. The export business increased by 5.3 percent during the period. The topline stood at Rs 936.15 crore for the nine month ended December 2017.
Here’s what brokerages say
Thirty one public offers have been handled by the four book running lead managers associated with the offer in the past three years. Out of these 31 offers, 10 issues closed below the offer price on listing date. As there are no comparable listed companies in India which work in the same line of business as RITES, a comparison with industry peers are not applicable. The average acquisition cost of equity shares for the selling shareholder in RITES offer is Rs 0.005 per equity share. The offer price at upper end of the price band is Rs 185.