IRFC IPO may hit markets this month. Indian Railway Finance Corporation (IRFC) initial public offering of about Rs 4,600 crore is likely to hit the markets later this month. This will be the first IPO by a railway NBFC (Non-Banking Financial Company).
“In all probability, it (IPO) will be by the third week but, if the market is not okay then we can go to the first or second week of January also,” Amitabh Banerjee, Chairman and Managing Director, IRFC.
The company, the dedicated financing arm of the Indian Railways, will
be going for the anchor investment also. “The government is planning
to have anchor investors in place for this IPO,” he added.
In January 2020, IRFC filed draft papers for its IPO. According to
market sources, the IPO is likely to be worth around Rs 4,600 crore.
On reasons for bringing the anchor portion, the CMD said it is a
confident market and the anchor investors would be assured of the fact
that they will be able to get the desired proportion of issuance
without regular bidding.
“They will be able to get the amount that they want to invest in IRFC
without going for the bidding route. Also, it will give a lot of
confidence to other investors in the market who are sitting on the
fence,” he said.
The issue is of up to 178.20 crore shares, comprising a fresh issue of
up to 118.80 crore shares and offer for sale of up to 59.40 crore
shares by the government, according to the draft prospectus.
On plans to utilise the funds mopped up from the offer, he added that
10 per cent of the IPO proceeds will go to the company’s balance sheet
and that will increase its net worth and this the firm will be using
for raising more money from the market.
He said this will add to the company’s capability to explore the
market further and garner more funds from the market which is the
order of the day because the government is in need of funds for its
capex expansion outlay requirements.
“Therefore, 10 per cent will come to my balance sheet and 5 per cent
will go to the government of India’s exchequer,” he added. Banerjee
said the prospect for having a good IPO is “very much bright”.
“Everyone (domestic and foreign investors) has a lot of interest in
this particular issue,” he said.
“Indian Railway Finance Corporation happens to be one of the safest
havens as far as investors are concerned,” he added.
Banerjee is hopeful that the IPO will be one of the landmark issuances
of the fiscal.
“I hope that it will be one of the landmark issuances in this fiscal
which augurs well for the other issuances that are coming forward for
the government of India in this fiscal,” the CMD said.
The book running lead managers to the issue are DAM Capital Advisors,
HSBC Securities and Capital Markets, ICICI Securities and SBI Capital
One of the purposes of the IPO is to unlock the value that the
company has built over so many years of its existence.
“We have already traversed a period of 34 years since its inception in
1986. So, it will unlock the value of the company, it will bring in
better corporate governance norms in the organisation which is
extremely necessary in any public sector company.
“That will bring in more transparency in the working of the company,” he said.
The company’s principal business is to borrow funds from the financial
markets to finance acquisition/ creation of assets which are then
leased out to the Indian Railways.
The Union Cabinet had in April 2017 approved listing of five railway
companies. Four of them — IRCON International Ltd, RITES Ltd, Rail
Vikas Nigam Ltd and Indian Railway Catering and Tourism Corp — have
already been listed.