The public offer of Indian Railway Finance Corporation has been subscribed 1.23 times on January 19, the second day of bidding, largely supported by retail investors so far.
The IPO has received bids for 152.6 crore equity shares against offer size of over 124.75 crore equity shares (excluding anchor book portion), the subscription data available on the exchanges showed.
The portion set aside for retail investors witnessed subscription of 2.33 times and that of employees 27.40 times, while the reserved portion of non-institutional investors was subscribed 24.3 percent and that of qualified institutional buyers 0.16 percent.
Indian Railway Finance Corporation IPO day 1: Issue subscribed 65%, retail portion fully booked
IRFC, the dedicated market borrowing arm of the Indian Railways, is going to raise Rs 4,633 crore through its public issue and of which, it already raised Rs 1,390 crore from anchor investors.
The public issue of 1,78,20,69,000 equity shares comprises a fresh issue of 1,18,80,46,000 equity shares and an offer for sale of 59,40,23,000 equity shares by the President of India. The issue includes a reservation of Rs 50 lakh worth of shares for eligible employees.
The price band for the issue, which will close on January 20, has been fixed at Rs 25-26 per share.
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"At the upper price band of Rs 26, IRFC is available at a P/E of 9x and P/B of 1.1x on an annualised basis, which appears attractive. Considering the extensive expansion plans of the Indian Railways, monopoly in the business, a low risk business model and stable return on equity (RoE), we assign a subscribe rating for the issue," Geojit Financial Services said.
Incorporated in 1986, IRFC follows a financial leasing model to finance the acquisition of rolling stock assets, which includes locomotives, coaches, wagons, trucks, flats, electric multiple units, containers, cranes, trollies etc. It is also into leasing of railway infrastructure assets and national projects of the Government of India (collectively, Project Assets) and lending to other entities under the Ministry of Railways (MoR).
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IRFC follows a low risk business model with a margin determined by the MoR at the end of each Fiscal year. In FY20, IRFC was entitled a margin of 40 bps over the weighted average cost of incremental borrowing for financing Rolling Stock Assets.
In FY20, IRFC financed Rs 71,392 crore accounting for 48.22 percent of the actual capital expenditure of the Indian Railways. For FY21, MoR is expected to borrow Rs 1,15,567 crore.
In FY20, assets under management (AUM) of IRFC grew by 32.4 percent YoY and disbursement by 35.9 percent YoY. It saw a strong growth during FY20, NII grew at 16.2 percent against 9.2 percent in FY19, pre-provision operating profit (PPoP) by 14.8 percent versus 9.9 percent in FY19, PAT saw a strong growth of 49.2 percent against 6.9 percent in FY19 as it is not required to pay MAT tax.
"As a borrowing arm, IRFC financed 48.2 percent of capex of Indian railways through various sources of funding from market. As backed by GOI with nil asset quality and strong CAR at 434 percent and ROA of 1 percent plus, we recommend subscribing the issue," IDBI Capital.
Indian Railway Finance Corporation enjoys the benefit of competitive cost of borrowings based on strong credit ratings and diversified sources of earning.
The company will utilise fresh issue proceeds for augmenting equity capital base to meet future capital requirements arising out of growth in business; and general corporate purposes.Home First Finance Company IPO to open for subscription on January 21, price band at Rs 517-518