Indian Railway Finance Corporation (IRFC) (Rs 4,600 crore IPO has opened today. For the first time, an IPO was opened by a non-banking financial company (NBFC). IRFC’s public issue will close on January 20. It is a major arm of the Indian Railways to raise money from the market. It is offering up to 178.2 crore shares, the face value of each share is Rs. 10. It has a fresh issue of up to 118.8 crore shares. Also India There is also a proposal to sell 59.4 crore equity shares of the government.
After the listing of the IPO of IRFC, the government’s stake will come down from 100 per cent to 86.4 per cent.
Learn here – 10 key things about IRFC IPO
1) IRFC is issuing shares at a price band of 25 to 26 rupees. Whose lot size are 575 shares. Or rather it can be bid for at least 575 equity shares. Or in multiples of 575 equity shares after that. The application amount per lot is Rs 14,950 and the price of each share has been fixed at Rs 26.
2) Indicative Timeline of IRFC IPO:
According to brokerage companies, IRFC shares can be allotted till January 25, while listing can be done on January 29.
3) KFin Technologies Private Limited is the registrar of the IRFC IPO, which will manage share allocation and refunds.
4) IRFC will use fresh IPO proceeds to boost its capital base and general corporate objectives.
5) DAM Capital Advisors, HSBC Securities and Capital Markets (India), ICICI Securities and SBI Capital Markets are the lead book-running managers.
6) “The financial performance of the company has been very encouraging. Its revenue and profits have seen an increase of 21 per cent and 26 per cent CAGR compared to FY 18-20. Further, given its strong relationship with MoR, the company maintains a low-risk profile”.
What does Religare Broking say?
Religare Broking said in a note that to reduce the interest rate and foreign currency exchange risks. IRFC has entered into a hedging arrangement in relation to its interest rate risk and a portion of foreign currency risk. For the year ended March 2020, IRFC posted a net profit of Rs 3,192 crore. Its assets under management stood at Rs 2.78 lakh crore as of September 30, 2020.
7) Religare Broking House says that given the long-term growth prospects and low-risk business model. We have a positive outlook on the company for the long term. On the valuation front, IRFC is once considered at the September 2020 price per-share book value. Investors have long term.
8) LKP Securities also recommends subscribing to the IRFC issue. The brokerage said, “The attractive valuation coupled with the healthy return ratio makes us optimistic on the long-term prospects for IRFC”.
IIFL Securities said in a note, “IRFC’s gross NPA is a total risk to the Railways or its controlled entities. For which the RBI has exempted IRFC from asset classification norms.”
9) The primary business of IRFC is financing the acquisition of rolling stock assets and project assets of Indian Railways. And lending to other entities under Railways. Over the last three decades, the company has played a key role in supporting the Indian Railways’ capacity addition by funding its annual plan outlay.
10) From the IPO onwards, IRFC had raised 3 1398.63 crores from 31 anchor investors.
What are the major risks?
IRFC has a significant dependence on revenue for railways. Changes in the railways’ Capex plans or policies. Such as the ability to raise their own funds, changes detrimental to the term of the agreement. Also lack of support for the ability to raise funds at a reduced amount. IIFL said in a note, “Rate or availability of funds are some of the major risk factors. These are affecting business and results of operations”.