The initial public offer of Indian Railway Finance Corporation has been subscribed 86 percent so far on January 19, the second day of the bidding process led by a strong response from retail investors.
The offer has received bids for 107.2 crore equity shares against an IPO size of over 124.75 crore equity shares (excluding the anchor book), according to the data available on the exchanges.
The portion set aside for retail investors is subscribed 1.67 times so far, while the employee portion was subscribed 16.95 times. The reserved portion of non-institutional investors saw a subscription of 12 percent, while qualified institutional investors have not put in their bids yet.
The issue will close on January 20.
The company has already raised Rs 1,390 crore of its total issue size of Rs 4,633 crore, through the anchor book.
Read here: IRFC IPO set to become first govt-owned NBFC to go public; takes anchor-investor route
The 1,78,20,69,000 equity shares public issue consists 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 IPO is of up to 178.20 crore shares with a face value of Rs 10 each. It comprises of a fresh issue of 118.80 crore equity shares and an offer-for-sale of up to 59.40 crore shares. The company has set a price band of Rs 25 to Rs 26 per equity share.
Read here: IRFC IPO opens today: Should you subscribe?
Most brokerages have advised subscribing to the issue keeping in mind the relatively low-risk business model, strategic role in financing growth of Indian Railways and long-term prospects considering electrification and network expansion.
They also said that the IPO is attractively priced and can be a good bet for conservative long-term investors as the company is seen reporting consistent growth numbers in the past.
Hem Securities said that the valuations were looking reasonable and it liked the low risk and cost-plus business model of the company along with strong asset-liability management. The brokerage sees limited expansion both on margin front as well return on equity (ROE) front without any diversification & on zero risk portfolio basis.
“Therefore looking after strong business profile of the company with limited growth aspect, we give ‘Subscribe’ rating for the long term. However in short term also, we are not expecting any major negative movement in stock prices after listing,” the brokerage added.
IRFC’s leases and loans are backed by Ministry of Railways and that’s why it has reported nil NPAs for the quarter ended September 2020. Fundamentally, the company is stable and has diversified sources of funding. IRFC’s AUM has also grown at a 20 percent CAGR from 2018 to 2020.
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Nirali Shah, Senior Research Analyst, Samco Securities said that despite being the primary lender to the Indian Railways the company comes with its own set of risks
“Firstly, it is highly dependent on the MOR for its margins and any adverse determination of the margin will also impact its profitability. Additionally, there is a possibility that its cost of funds may rise in the future. Keeping these inherent risks in mind, we feel investors should assess their own risk appetite and then decide to go for the IPO,” Shah said.
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