In this article, FinTuts will share its views or insights about the Indian Railway Finance Corporation(IRFC) IPO, so that you can take a self-decision on your investment or wealth creation journey and can be financially literate and atmanirbhar.
Founded in 1986, the Indian Railway Finance Corporation(IRFC) is a public-sector organization that is fully-owned by the Government of India(GoI). As per the DRHP, IRFC is registered with the RBI as an NBFC-ND-IFC(i.e. a Non-Deposit accepting Infrastructure Finance Company).
IRFC is mainly engaged in financing the acquisition of rolling stock assets, leasing of railway infrastructure assets, and lending to entities under the Ministry of Railways(MoR). Being the borrowing arm of Indian Railways, IRFC is in charge to raise funds for MoR that’s required to procure rolling stock assets(wagons, trucks, electric multiple units, locomotives, coaches), its improvement, expansion, and assets management.
In short, IRFC is in the primary business of borrowing funds from the financial markets to finance the acquisition/creation of assets which are then leased out to the Indian Railways or any entity under the Ministry of Railways. In 2019, the actual capital expenditures by the Indian Railways were Rs. 1,334 billion, out of which, IRFC financed Rs. 525.35 bn accounting for 39.34% expenditures.
Since 2017, other railway companies such as IRCON International Ltd, RITES Ltd, Rail Vikas Nigam Ltd (RVNL) and Indian Railway Catering, and Tourism Corporation (IRCTC) have already been listed.
Objectives of IRFC IPO:
- To augment the company’s equity capital base to meet business future growth requirements
- To meet general corporate purposes
Statistics of IRFC IPO
Let’s look at the strengths of IRFC:-
- Plays a strategic role in Indian Railways growth
- Highest possible credit rating i.e. CRISIL AAA/A1+ and ICRA AAA/A1+
- Offers a competitive cost of borrowing
- A low-risk business model
- Strong financial performance
- Sound asset-liability management
- Experienced management team
Let’s look at the weaknesses of IRFC:-
- High Debt-to-equity ratio
- Profitability depends on MoR
Highlights of IRFC IPO
- IPO Opening Date: Jan 18, 2021
- IPO Closing Date: Jan 20, 2021
- Issue Size: Rs.4,633.38 Cr
- Issue Type: Book Built Issue IPO
- Face Value: ₹10 per equity share
- IPO Price: ₹25 to ₹26 per equity share
- Market Lot: 575 Shares (1 Lot)
- Min Order Quantity: 575 Shares (1 Lot)
- Max Order Quantity: 7475 (13 Lot)
- Listing At: BSE, NSE
- Retail Allocation: 35%
- QIB Allocation: 50%
- HNI Allocation: 15%
- Issue Size: 1,782,069,000 Eq Shares of ₹10
- Fresh Issue: 1,188,046,000 Eq Shares of ₹10
- Offer for Sale: 594,023,000 Eq Shares of ₹10
- Basis of Allotment Date: Jan 25, 2021
- Initiation of Refunds: Jan 27, 2021
- Credit of Shares to Demat Account: Jan 28, 2021
- IPO Listing Date: Jan 29, 2021
The Bottom Line | Verdict
Looking at the strong financial performance of IRFC over the last five years, the total income of the company showed a CAGR of 12.99%.
The strong fundamental aspects and attractive valuation with healthy return ratios are making IRFC a good choice for not just listing gains but also make investors optimistic for long-term investment.
We hope that this article might have surely helped you to understand in general about the Indian Railway Finance Corporation(IRFC) IPO.
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