Indian Railway Finance Corporation, the dedicated market borrowing arm of the Indian Railways, will debut on bourses on January 29.
The final issue price has been fixed at Rs 26, the higher end of the price band. The company raised Rs 4,633 crore through the public issue which closed last week and will utilise fresh issue proceeds for future capital requirement arising out of growth in IRFC business.
Given the lower-than-expected IPO subscription figures, weakness in the equity markets and the decline in grey market premium, experts expect Indian Railway Finance Corporation (IRFC) to debut with a marginal premium over its issue price.
"Considering the risk in current volatile equity markets, IRFC listing can see a muted opening in the range 5-10 percent in the best case scenario. Subscription figures were also not so encouraging which hint a subdued performance," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.
The public issue was subscribed 3.49 times during January 18-20 as retail investors' reserved portion witnessed a subscription of 3.66 times, qualified institutional buyers (3.78 times) and non-institutional investors (2.67 times).
Gaurav Garg, Head of Research at CapitalVia Global Research also believes IRFC might not able to impress the street with its listing gains as the market condition are not favourable. "Grey market premium indicates a marginal gain of 4-7 percent which is not enough to book on listing day," he said.
IRFC is the finance arm of the Indian Railways which is wholly-owned by the Government of India and is fundamentally sound and is worth holding for the long term, Garg added.
IRFC shares had traded with 7.7-11.5 percent premium (Rs 2-3) over its issue price in the grey market, before public issue announcement. After the announcement, the premium fell to around 4 percent and after the closing of the public offer, the premium dropped further to 1.5-1.9 percent (Rs 0.4-0.50), as per the data available on IPO Watch.
Indian equity markets corrected for the fifth consecutive session on January 28 losing more than 6 percent from its record high levels as traders turned cautious ahead of Union Budget 2021-22 which is scheduled to be presented on February 1.
IRFC's primary business is financing the acquisition of rolling stock assets, leasing of railway infrastructure assets and national projects of the GoI (Project Assets) and lending to other entities under the Ministry of Railways (MoR). As of September 2020, its total AUM consisted of 55.34 percent of lease receivables primarily in relation to rolling stock assets, 2.25 percent of loans to central public sector enterprises entities under the administrative control of MoR (other PSU entities), and 42.41 percent of advances against leasing of Project Assets.
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Over the last 3 decades, IRFC has played a significant role in supporting the capacity enhancement of the Indian Railways by financing a proportion of their annual plan outlay.
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