Ali Hasan
Save your money folks if you wanted to invest in a government corporation as the IPO of IRFC is about to hit the market on January 18, 2021. The IPO will raise approximately Rs 4,633 crores and will be on offer for Rs 25-26 per share. The lot size is 575.
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% 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.
Up to 50% of the net offer will be reserved for qualified institutional buyers (QIBs), 15% for non-institutional buyers and remaining 35% for retail investors. Earlier in April 2017, the Union Cabinet had approved the listing of 5 railway companies. Out of which the following companies have already been listed.
- IRCON International Ltd,
- RITES Ltd, Rail Vikas Nigam Ltd (RVNL)
- Indian Railway Catering and Tourism Corporation (IRCTC)
IRCTC shares were listed in October 2019 with over 100% 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 in September 2018, with a 14% discount to its IPO price.
In January 2020, IRFC had filed draft papers for its IPO. The issue is of up to 178.20 crore shares, comprising a fresh issue of up to 118.80 crore shares and offer for sale of up to 59.40 crore shares by the government, according to the draft prospectus. The company’s principal business is to borrow funds from the financial markets to finance acquisition/ creation of assets which are then leased out to the Indian Railways.
IRFC, set up in 1986, is a dedicated financing arm of the Indian Railways for mobilising funds from domestic as well as overseas markets. Its primary objective of IRFC is to meet the predominant portion of ‘extra budgetary resources’ requirement of the Indian Railways through market borrowings at the most competitive rates and terms.
In FY20 , the company financed Rs 71,392 crore, accounting for 48.22% of the actual capital expenditure of the Indian Railways. The company follows a financial leasing model for financing the rolling stock assets. The period of lease with respect to rolling stock assets is typically 30 years, comprising a primary period of 15 years followed by a secondary period of 15 years, unless otherwise revised by mutual consent.
In terms of the leasing arrangements, the principal amount pertaining to the leased assets is effectively payable during the primary 15-year lease period, along with the weighted average cost of incremental borrowing and a margin determined by the railway ministry in consultation with us at the end of each fiscal year.
As far as the company’s financials are concerned, the company’s total revenue rose 22.15% to Rs 13,421 crore in FY20 from Rs 10,987 crore in FY19. Sales were up 19.33% in FY19, and stood at Rs 7,384 crores in the 6 months ended September 30.
Profit for the 6 months ended September 30 stood at Rs 1,886.84 crore. It stood at Rs 3192 crore in FY20, Rs 2,140 crore in FY19 and Rs 2,001 crore in FY18. The company’s capital adequacy ratio as of March 31, 2020 and September 30, 2020 was 395.39% and 433.92%, respectively. As of September 30, 2020, the company did not have any non-performing asset (NPA).
