Indian Railway Finance Corporation (IRFC) brings IPO to raise ₹ 4,633.38 crores with a fresh issue of ₹ 3,088.92 crores and an Offer for Sale of ₹ 1,544.46 crores at a price band of ₹ 25 to ₹ 26 per equity share. The IPO opens on 18 January 2021 and closes on 20 January 2021.
Company Overview
IRFC, incorporated on 12 Dec 1986 in New Delhi, a public sector undertaking wholly owned by the Government of India. IRFC is involved in financing the acquisitions of rolling stock assets, providing loans to entities under the Ministry of Railways, and leasing railway infrastructure-related assets. IRFC is responsible for fundraising from financial markets to acquire & finance rolling stock assets such as coaches, carriages, rail cars, containers, trolleys, wagons, locomotives, trawlers, track laying machines, vehicles of all kinds moving on rails etc., and leasing them to Indian Railways. The company is also responsible for raising funds for improvements, expansion, and management of assets of Indian Railways. It undertakes about 40% expenses of Indian Railways.
In Fiscal 2020, the company financed Rs 71392 crores, accounting for 48.22% of the actual capital expenditure of the Indian Railways.
The company’s Capital Adequacy Ratio (CAR) as of Mar 31, 2020, and Sep 30, 2020, was 395.39% and 433.92%, respectively. As of Sept 30, 2020, the company’s did not have any NPA.
Qualitative Factors
- Strategic role in financing the growth of Indian Railways.
- Competitive cost of borrowings based on strong credit ratings in India and diversified sources of funding.
- Consistent financial performance and cost-plus model.
- Low-risk business model.
- Strong asset-liability management.
- Experienced senior management and committed team.
Objects of the Issue
- Expanding equity capital base to meet future capital requirements arising out of growth in business
- General corporate purposes
Financials of Indian Railway Finance Corporation (IRFC)
| Parameter (in Rs Cr) | 30 Sep 20 | FY20 | FY19 | FY18 |
| Total Revenue | 7385 | 13421 | 10987 | 9208 |
| YoY Growth | 12% | 22% | 19% | |
| Total Expenses | 5498 | 10229 | 8232 | 6676 |
| YoY Growth | 11% | 24% | 23% | |
| PAT | 1887 | 3192 | 2140 | 2001 |
| YoY Growth | 16% | 49% | 7% | |
| Total Assets | 291987 | 275504 | 206438 | 161451 |
| EPS | 1.59 | 3.40 | 3.26 | 3.07 |
Shareholding Pattern
| Shareholders | Pre Issue | Post Issue |
| Promoter | 100% | 86.36% |
| Public | 0% | 13.64% |
| Total | 100% | 100% |
Valuation
The company’s P/E ratio comes out to be around 7.64, which is very less than the industry P/E, which is 17.3. The Return on Equity (ROE) is 13%, and the Net Profit Margin (NPM) is 25%. The Net Interest Margin (NIM) is 1.5% which is very less as there is no risk associated with their lending.
Comparison with Peers
The company enjoys a monopoly in the business as it is the only company responsible for financing to Indian Railways.
IRFC IPO Issue Details
| Issue Open | 18 Jan 21 – 20 Jan 21 |
| Issue Type | Book Built Issue IPO |
| Issue Size | 1,782,069,000 equity shares of ₹ 10 (aggregating up to ₹ 4633.38 Crores) |
| Fresh Issue | 1,188,046,000 equity shares of ₹ 10 (aggregating up to ₹ 3,088.92 Crores) |
| Offer for Sale | 594,023,000 equity shares of ₹ 10 (aggregating up to ₹ 1,544.46 Crores) |
| Face Value | ₹ 10 per equity share |
| Issue Price | ₹ 25 to ₹ 26 per equity share |
| Market Lot | 575 shares |
| Min Order Quantity | 575 shares |
| Listing At | BSE, NSE |
| Allotment Date | 25 Jan 21 |
| Listing Date | 29 Jan 21 |
IRFC IPO Bid Details
| Sl No. | Category | Subscription Status (No. of times) | ||
| 18 Jan 21 | 19 Jan 21 | 20 Jan 21 | ||
| 1. | QIB | 0.00x | 0.00x | 3.8x |
| 2. | NII | 0.09x | 0.24x | 2.6x |
| 3. | RII | 1.25x | 2.33x | 3.6x |
| 4. | Employee | 13.52x | 27.40x | 43.75x |
| Total | 0.65x | 1.23x | 3.48x | |
IRFC IPO Lot Size and Price for RII
| Application | Lots | Shares | Amount (Cut-off) |
| Minimum | 1 | 575 | ₹ 14,950 |
| Maximum | 13 | 7475 | ₹ 194,350 |
| Book Running Lead Managers to the Offer |
| 1. DAM Capital Advisors Limited |
| 2. HSBC Securities and Capital Markets (India) Private Limited |
| 3. ICICI Securities Limited |
| 4. SBI Capital Markets Limited |
| Registrar to the Offer |
| KFin Technologies Private Limited |
| Selenium Tower-B, Plot 31 & 32, Gachibowli Financial District, Nanakramguda, Serilingampally, Hyderabad 500 032, Telangana, India Telephone: +91 40 6716 2222 Email: einward.ris@kfintech.com Investor grievance email: irfc.ipo@kfintech.com Contact Person: M. Murali Krishna Website: www.kfintech.com SEBI Registration No: INR000000221 |
| Registered and Corporate Office: UG-Floor, East Tower, NBCC Place, Bisham Pitamah Marg, Pragati Vihar, Lodhi Road, New Delhi – 110 003; Tel: +91 (11) 2436 9766 |
Source: Indian Railway Finance Corporation Limited RHP
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