RailTel Corporation of India shares have risen 33.5 percent intraday on the listing day despite sharp correction in the equity market on February 26. In comparison, Sensex and Nifty50 have fallen more than 3 percent each.
After opening at Rs 104.60, it extended gains to Rs 125.50 on the BSE, the highest level of the day. On the National Stock Exchange, too, it rose 31.5 percent to Rs 123.65 after opening at Rs 109.
Experts have advised either holding on to the allotted shares for long term or book only partial profits to earn some listing gains.
"Investors should hold the shares if allotted on listing day. Around Rs 100 is the good buying price on the listing day," Keshav Lahoti, Associate Equity Analyst at Angel Broking told Moneycontrol.
"We are positive on the company considering that it is a key partner to the Indian Railways in digital transformation, it has a strong financial position (debt free) and has been consistently paying dividends since 2008," he said.
Prashanth Tapse, AVP Research at Mehta Equities also said one should look to accumulate or add-on more for a long term and if fresh investors would like to add on listing day or post listing under Rs 100 would be a right levels.
He believes RailTel outlook looks promising and it would be a direct beneficiary of the government's initiatives to improve the communication infrastructure of the Railways. It also plans to explore opportunities in the overseas market, which is expected to support growth over the long term, he said.
RailTel Corporation, a Mini Ratna PSU, is an information and communications technology (ICT) infrastructure provider and is one of the largest neutral telecom infrastructure providers in India.
The company has successfully completed a number of long-term projects for provision of ICT services across India. These include the NKN and Bharat Net (formerly, the National Optical Fiber Network) projects for providing high capacity bandwidth pipes and laying optical fiber cable for connectivity of gram panchayats in India.
As of January 2021, RailTel had exclusive right of way along 67,415 route kilometers connecting 7,321 railway stations for laying optical fiber cable. Its optical fiber network covers 59,098 route kilometers and covers 5,929 railway stations across towns and cities in India.
RailTel serves as a key network for the Indian Railways and is also working with the Indian Railways to transform railway stations into digital hubs by providing public Wi-Fi at railway stations across India.
"We advise investors to book partial profit on listing day if stock will be available on 12-13 percent premium. We recommend wait before making new buying on listing day & hold remaining stock for long term as looking after the industry dynamics of telecom & telecom data services where broadband market is gaining pace with enterprise data services to register volume driven growth along with huge potential offer by Indian market as India has lowest fixed broadband subscription per 100 people will give boost to company’s performance going forward," Astha Jain, Senior Research Analyst at Hem Securities said.
"Also the edge which company holds over its peers in terms of financial performance makes this company attractive for long term," she added.
RailTel has been profitable since FY07 and has consistently declared and paid dividends since FY08. The company’s net profit margin of 12.50 percent in FY20 was the highest among the key telecom companies and key IT/ICT companies in India and was 8.48 percent in H1FY21. Its EBITDA margin was the highest among the key IT/ICT Companies in India in FY20.
The state-owned entity raised Rs 891 crore through public issue last week, and all the money will to go the Government of India as it was completely an offer for sale issue.
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