With much less than two months into 2021, Ministry of Railways has entered stock markets as soon as once again for an initial public providing (IPO). After the public situation of IRFC, now RailTel is hunting to raise Rs 819 crore from investors by means of the share sale beginning today. Incorporated in 2000, RailTel is an info and communications technologies infrastructure provider and one of the biggest neutral telecom infrastructure providers in the nation. Ahead of the situation, RailTel has raised Rs 243.99 crore from 14 Anchor Investors, allocating 2.59 crore equity shares. IRFC, an additional Ministry of Railway firm to debut on the bourses this year, at the moment trades flat more than its situation cost.
Issue Details
Investors can bid for RailTel’s Rs 819 crore public situation at a cost band of Rs 93-94 per share with a face worth of Rs 10. Minimum application size for the situation has to be 155 equity shares, translating to a minimum application size of Rs 14,570. Overall, 8.7 crore equity shares are on give by means of the IPO.
RailTel’s situation is purely an give for sale (OFS) with no fresh situation. Of this, 50% is reserved for Qualified Institutional Buyers (QIB), when 15% is for Non-Institutional Investors (NII) and the remaining 35% is for retail investors. Post situation the promoter shareholding will trim down to 73% when Public shareholding will zoom to 27%.
About the enterprise
RailTel is a Mini Ratna (Category-1) state-owned firm. This signifies that the enterprise has recorded earnings for the final 3 consecutive years. RailTel is one of the biggest neutral telecom infrastructure providers in India. As of January 31, 2021, the enterprise had the exclusive suitable of way along 67,415 route kilometre connecting 7,321 railway stations for laying optical fibre cable
“RailTel offers leased line and VPN facilities and also provide IP-1 services. It provides the strategic and critical network infrastructure to the GoI and certain state governments. The company is also an implementing partner for the Bharat Net project to create optical fibre cable-based broadband infrastructure,” mentioned domestic brokerage firm ICICI Direct. The enterprise plays a vital function in the digital transformation of Indian Railways.
IIFL Securities added that the enterprise could advantage from robust government backing. “ We believe that GoI programmes to increase rural broadband connectivity can aid Railtel in maintaining revenue growth momentum,” they mentioned in a note. Apart from bandwidth and ISP associated services, the enterprise also offers Telecom Infrastructure Services, Managed Data Center & Hosting Services and undertakes a variety of consultancy and program integration-associated projects which diversify income streams.
Risks
What may possibly push RailTel out of favour would be unfavourable government policies and regulations. Analysts at Choice Broking mentioned that reduce spending from the central and state governments and a jump in competitors from private firms could spoil be some of the future headwinds for the firm.
Valuations
At Rs 94 per share, the valuation on H1FY21 annualized EPS without the need of adjusting for impairment & non-recurring products is optically higher at 33x but the exact same post adjustment is 20x, mentioned IIFL Securities who have a ‘Subscribe’ rating on the IPO. Choice Broking valued the situation at a FY20 P/E a number of of 15.8x at the greater finish of the cost band. Choice Broking as well has a ‘Subscribe’ rating. Meanwhile, ICICI Direct without the need of rating the situation mentioned that at Rs 94 per share the stock is accessible at 21.4x FY20 cost/EPS.
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