Indian Railway Finance Corporation IPO (IRFC IPO) – Date, Issue Price, GMP, Review, Analysis and Details
IRFC IPO date is in news for some time and would open for subscription on 18th January, 2021. Indian Railways Finance Corporation (IRFC) is the first public sector, non banking financial services (NBFC) company that is coming for an IPO now. IRFC is the borrowing arm of Indian Railways. The issue size is Rs 4,633 Crores. Should you invest in IRFC IPO? What are the risk factors an investor should keep in mind before applying for this IPO? Let me review and provide detailed analysis and news about this IPO in this article.
About IRFC Limited
IRFC is the dedicated market borrowing arm of the Indian Railways. They are wholly-owned by the Government of India acting through the Ministry of Railways (MoR). They are registered with the Reserve Bank of India as a NBFC are classified under the category of an “Infrastructure Finance Company”.
IRFC primary business is financing the acquisition of rolling stock assets, which includes both powered and unpowered vehicles. For example locomotives, coaches, wagons, trucks, flats, electric multiple units, containers, cranes, trollies of all kinds and other items of rolling stock components as enumerated in the Standard Lease Agreement, leasing of railway infrastructure assets and national projects of the Government of India and lending to other entities under the Ministry of Railways (MoR), Government of India. MoR is responsible for the procurement of Rolling Stock Assets and for the improvement, expansion and maintenance of Project Assets. IRFC is responsible for raising the finance necessary for such activities. Over the last three decades, the company has played a significant role in supporting the capacity enhancement of the Indian Railways by financing a proportion of its annual plan outlay. The Union Budget proposed a capital expenditure of Rs 1,602 billion for the Indian Railways for Fiscal 2020, which was higher than the capital expenditure (revised estimate) of Rs 1,388.58 billion in Fiscal 2019. The actual capital expenditure of the Indian Railways was Rs 1,334 billion in Fiscal 2019. In Fiscal 2019, they financed Rs 525.35 billion, accounting for 39.38% of the actual capital expenditure of the Indian Railways.
IRFC IPO Details
Here are the IPO issue details.
|IRFC IPO – Issue Details|
|IRFC IPO Date||Jan 18 to Jan 20, 2021|
|Face Value||Rs 10 per share|
|IPO Price band||Rs 25 to Rs 26 per share|
|Issue Size||Total of Rs 4,633.38 Crores
Fresh issue – Rs 3,089 Crores
OFS – Rs 1,544 Crores
|IPO Lot Size||575 shares|
|Lead Managers||IDFC Securities, HSBC Securities, ICICI Securities and SBI Capital Markets|
|Listing at||BSE and NSE|
Objects of issue – IRFC IPO
Here are the objects of the IPO issue.
1) Offer for sale (OFS) of 59.4 Crore shares: Money received under OFS would go to selling shareholders and company would not receive any proceeds.
2) Fresh issue of 118.8 Crore shares: Proceeds would be used for:
i) Augmenting equity capital base to meet its future capital requirements arising out of growth in its business.
ii) General corporate purpose
Who are the company promoters?
President of India acting through the Ministry of Railways (MoR) is the promoter of IRFC.
Here is the summary of the financial information of the company.
|Total Revenues (Rs in Millions)||Profits after tax
(Rs in Millions)
|6 Months ending Sep-20||73,848.2||18,868.4||25.6%|
Its EPS for FY2020 is Rs 3.4 and last 3 years average EPS is Rs 3.3.
What are the key strengths of IRFC Limited?
Every investor should understand the company’s key strengths so that one can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the company.
1) Strategic role in financing growth of Indian Railways
2) Good credit rating i.e. CRISIL AAA/A1+ and ICRA AAA/A1+
3) Competitive cost of borrowings based on strong credit ratings in India and diversified sources of funding
4) Consistent financial performance and cost plus model
5) Low risk business model
6) Strong asset-liability management
7) Experienced senior management and committed team
What are the various strategies of IRFC Ltd?
Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.
1) Diversification of borrowing portfolio
2) Broaden its financing portfolio
3) Continued focus on asset-liability management
4) Provide advisory and consultancy services and venture into syndication activities
Why to invest in this IPO?
Here are a few reasons to invest.
1) IRFC is the only public sector NBFC company that has come to public now.
2) It has generated strong revenue growth in the last 3.5 years.
3) Its margins have improved in the last 3.5 years (CAGR 58%). It was generating 21.7% margins in FY2018 Vs 23.8% in FY2020.
4) It is consistent paying dividend PSU in the last 3 years.
5) There are several high speed rail corridor projects that are estimated to come in the next couple of years. There is huge financing required for such projects. This would provide good opportunities for IRFC.
Risk Factors of investing in this IPO
These risk factors can impact company revenue and margins which would affect its share price. Investors should go through these points and understand them before investing.
1) They derive significant revenue from Indian Railways. If there is a loss or reduction in business or if Indian Railways find other avenues for direct borrowing, this would impact company business.
2) Its business growth is dependent on the growth of Indian Railways. Such business is susceptible to Govt of India initiatives to either modernize the railways and slow down the growth of Indian Railways.
3) Its operational efficiency would completely dependent on its ability to maintain and get diverse sources of funds and at a low cost. If there is any disruption in its funding sources or if there is any inability to raise funds for low cost, it would impact its business.
4) Its margin on the rolling stock assets to the Ministry of Railways is not favorable, then it would have an impact on its business.
5) Its business need to match with tenure of lease and borrowings. If there is any mismatch, it can lead to reinvestment and liquidity risks and it would adversely impact its financial condition and operations.
6) There are certain T&C of the standard lease agreement with Ministry of Railways. In the future if there are any change in such terms and conditions, it can adversely impact the business, financial condition and operations.
7) For complete internal and external risk factors, you can refer the RHP of the company.
IRFC IPO Promoter Holding – Pre and Post IPO
Pre-issue share holding – 100%
Post issue share holding – 86%
IRFC IPO GMP / Grey Market Price
This section would be updated when appropriate info is available.
IRFC IPO Dates / Timetable (Including Listing date)
|IRFC IPO Schedule|
|Finalization of Basis of Allotment||22-Jan-21|
|Unblocking of ABSA and Initiation of Refunds||26-Jan-21|
|Credit of shares to Demat Accounts||27-Jan-21|
|IPO Shares Listing Date||28-Jan-21|
IRFC IPO price valuations
Here is how the valuations look like.
1) On the upper price band of Rs 26 and EPS of Rs 3.4 for FY20, the P/E ratio works out to be 7.6x.
2) For last 3 years EPS of Rs 3.3, the PE ratio is 7.8x. Even if we annualise for FY21, P/E works out to be 8.2x
3) Means, the company is asking the issue price of Rs 26 of the upper price band in the P/E range of 7.6x to 8.2x.
4) There are no listed peers in the same industry, hence we cannot say IRFC Share price is under priced or overpriced. However, considering at 8.2x P/E, the issue price is attractively priced.
IRFC IPO – Should you invest?
IRFC IPO News is there for some time and investors have been eagerly waiting for this IPO.
IRFC is the public sector NBFC that would finance for Indian Railways projects. It has shown strong revenue and margin growth. Its issue price is attractively priced. When average IPOs are getting over subscriptions and listing gains, there is definitely good demand for IPOs like IRFC. High risk investors can invest for listing gains as well as for medium to long term perspective.
FAQs on IRFC Limited IPO
1) Is IRFC IPO Date confirmed?
Yes. The IPO would open on 18th January, 2021.
2) What is the IRFC IPO Size?
This IPO size is Rs 4,633.38 Crores.
3) When IRFC IPO allotted?
This IPO would be allotted on 22nd January, 2021.
4) When is IRFC IPO listing date?
IRFC IPO would get listed on 28th January, 2021. It would be listed on both NSE and BSE.
5) What is IRFC IPO GMP?
IRFC GMP is at 1.65 to 2 (as on 16th January, 2021) which is very low though it is available at attractive valuations.
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