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RailTel Corporation of India IPO day 1: Issue subscribed 2.63 times, retail portion booked 5 times

The company is expected to enjoy premium post listing owing to absence of major players in the listed space, said Ajcon Global.

February 16, 2021 / 07:50 PM IST

The public offer of RailTel Corporation of India, the information and communications technology (ICT) infrastructure provider, has subscribed 2.63 times so far in morning on February 16, the first day of bidding.

The issue has received bids for 16.13 crore equity shares against offer size of over 6.11 crore shares, the subscription data available on the exchanges showed.

The retail investors seem strongly supportive to the issue as their reserved portion has subscribed 4.99 times, and that of employees 81 percent. The portion set aside for non-institutional investors has subscribed 75 percent, while qualified institutional buyers have not started putting their bids yet.

The offer size mentioned above is excluding the anchor book. The company raised Rs 244 crore from anchor investors on Monday, at higher end of price band of Rs 93-94 per share.

The public issue comprises a complete offer for sale of over 8.71 crore equity shares by the Government of India, hence all the money will go to selling shareholders.


RailTel Corporation of India IPO opens today: Should you subscribe?

"At the upper end of the price band of Rs 94, the company's IPO is valued at P/E of 21x on FY20 EPS which is decent and P/E of 34x on annualised H1FY21 EPS which looks fairly valued. The company is expected to enjoy premium post listing owing to absence of major players in the listed space," said Ajcon Global which recommended subscribing the issue.

The key reasons behind its recommendation are that the company is among the largest neutral telecom infrastructure providers in India with pan-India optic fiber network; diversified portfolio of services and solutions; key partner to the Indian Railways in digital transformation; strong track record of financial performance; professionally managed with strong corporate governance and senior management team with significant industry experience; and debt free company with positive operating cashflow, low working capital cycle and strong return ratios.

RailTel Corporation of India IPO: 10 things to know before subscribing to the issue

RailTel was incorporated in September 2000 with the aim of modernising the existing telecom system for train control, operation and safety and to generate additional revenues by creating nationwide broadband and multimedia network by laying optical fiber cable by using the right of way along railway tracks.

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 has been profitable since FY07 and has consistently declared and paid dividends since FY08. Its 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. The company's EBITDA margin was the highest among the key IT/ICT Companies in India in FY20.

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first published: Feb 16, 2021 11:57 am
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