IRFC IPO – valuation and Recommendations


With 2020 behind us and businesses optimistic about recovering from the economic impact of the pandemic last year, there are some excellent IPOs being launched in 2021.

The Indian Railway Finance Corporation (IRFC) has announced an IPO to be launched on January 18, 2021. Here is all you need to know about the issue.

You would be able to invest in this IPO from January 18, 2020.

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Latest IRFC ipo grey market premium: Rs 1.3 per share , Grey market premium of 4.2%

IRFC IPO Subscription Status (Bidding Detail):

CategoryIPO Subscription
QIB 3.78x
NII 2.67x
RII 3.66x
Employee 43.76x
Total 3.49x

IRFC Final Subscription
==================

———————– BSE ————– NSE —————- Total
QIB ————— 2.8906 ———– 0.8888 ————– 3.78x
NII —————- 2.143 ————- 0.5235 ————– 2.67x
RII —————- 2.0713 ———– 1.5929 ————– 3.66x
EMP ———— 40.2994 ———– 3.4624 ———— 43.76x

Total —————2.3266 ———–1.1629 ————– 3.49x

Total No.of Application (Approx) —– 2551325
Retail Subscription on the basis of Applications — 2.35x
Total Retail Subscription —— 3.66x

Ahead of the IPO, IRFC had raised ₹1398.63 crores from 31 anchor investors.

At the end of Day 2, the IPO was 1.22 times subscribed. The retail segment was 2.33 times subscribed while the HNI segment 0.24%.

IPO Date January 18, 2021 to January 20, 2021 

  • Issue Type Book Built Issue IPO 
  • Issue Size 1,782,069,000 Equity Shares of Rs.10 totaling up to Rs.4,633.38 Crore 
  • Fresh Issue 1,188,046,000 Equity Shares of Rs.10 
  • Offer for Sale 594,023,000 Equity Shares of Rs.10 
  • Face Value Rs.10 per equity share 
  • IPO Price Rs.25 to Rs.26 per equity share 
  • Market Lot 575 Shares
  • Min Order Quantity 575 Shares
  • Listing At BSE, NSE

Indian Railway Finance Corporation (IRFC) IPO Tentative Timetable

Bid/Offer Launch dateJanuary 18, 2021
Bid/Offer Last dateJanuary 20, 2021
Basis of Allotment finalization dateJanuary 25, 2021
Initiation of RefundsJanuary 27, 2021
Credit of Shares to Demat AccountJanuary 28, 2021
IPO Shares Listing DateJanuary 29, 2021

Objects of the Offer

Indian Railway Finance Corporation proposes to utilize the net proceeds from the fresh issue for augmenting its equity capital base to meet the future capital requirements arising out of growth in its business and general corporate purposes. 

About the company – Indian Railway Finance Corporation (IRFC)

Indian Railway Finance Corporation is the dedicated borrowing division of the Indian Railways. IRFC is wholly-owned by the Government of India and acts through the MoR.

IRFC also plays a role in the leasing of the railway infrastructure assets and national projects of the Government of India and offers finance to other entities under the Ministry of Railways (MoR).

IRFC primarily finances the purchase of rolling stock assets – powered and unpowered vehicles. These include coaches, locomotives, trucks, wagons, containers, electric multiple units, trollies, etc.

The organization has contributed significantly over the last three decades in enhancing the capacity of the Indian Railways by financing the annual plan.

It is registered with the Reserve Bank of India (RBI) as a Non-Banking Finance Company (NBFC) under the category of an Infrastructure Finance Company. IRFC has a strong leasing model for financing the rolling assets. Typically, the period of lease is around 30 years with the first 15 years focused on recovering the principal amount along with the weighted cost of borrowing plus a margin and the last 15 years to generate revenue. It has the highest credit ratings for an Indian issuer for domestic and international borrowings. 

In Fiscals 2017, 2018 and 2019 (revised estimate), we were responsible for financing 72%, 93% and 82%, respectively, of the Indian Railway’s total rolling stock.

Indian Railway Finance Corporation (IRFC) Financial
Indian Railway Finance Corporation (IRFC) Financial

Company’s Credit Ratings:

  • Indian Railway Finance Corporation maintains the highest possible credit ratings for an Indian issuer both for domestic and international borrowings and have received the highest credit ratings from CRISIL – CRISIL AAA and CRISIL A1+, ICRA – ICRA AAA and ICRA A1+, and CARE – CARE AAA and CARE A1+.

Objectives of the Issue:

Offer for Sale: (Rs. 1544 cr)

  • The proceeds of the Offer for Sale shall be received by the Selling Shareholder only and our Company will not receive any proceeds from the Offer for Sale.

Fresh Issue: (Rs. 3089 cr)

  • Augmenting our equity capital base to meet our future capital requirements arising out of growth in our business.
  • General corporate purposes.

 Financials of the Company:

(in Crores)FY 17FY 18FY 19FY 2030th Sept 20
Revenue8013.79268.311,133.513,4217384.8
Net Profit921.12049.02254.63192.01886.8

Positives for the Company:

  • Strategic role in financing 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.

Subscription Details: (Will be Updated)

(Subscription-Category-Wise (no. of times) Till time : 05:00 PM)Shares Offered18/1/202119/1/2021Day-3
QIB35,63,75,3390.000.00
NII26,72,81,5040.090.24
Retail62,36,56,8431.252.33
Employee      1,92,30713.5327.41
TOTAL1,24,75,05,9930.651.22

IPO Valuation Parameters:

Earnings Per Share (EPS)Price To Earnings ratio (PE)Return on Net Worth (RoNW)Net Asset Value (NAV)
3.4010.64 (Post Issue)11.57%25.50

IRFC IPO Recommended by

  • ICICIdirect.com, as a dedicated finance arm of Indian Railways, IRFC remains a low-risk model with no non-performing asset with a return on equity of 11-12 per cent.
  • Anand Rathi Financial Services have also given a ‘subscribe’ rating to IRFC. “We believe the company is reasonably valued at current valuation and enjoys high creditworthiness. However, it is highly dependent on Indian Railways’ capex plans,” analysts added.
  • Analysts at Angel Broking said they expect the company to post strong growth driven by capex by Indian railways.
  • Religare Broking said, “Given the promising long term growth prospects and low risk business model, we have a positive view on the company for long term. On the valuation front, IRFC is valued at one time September 2020 book value per share. Investors having long term view can invest in the company,” 
  •  LKP Securities also recommends subscribe to the IRFC issue. “Attractive valuation with healthy return ratios make us optimistic on the long term prospects for IRFC,” the brokerage said.
  • Astha Jain of Hem Securities said that while valuations look reasonable and she likes the low risk, strong asset liability management and the cost-plus-business model of the company, she sees limited expansion on the margin and RoE fronts.
  • IRFC IPO Review by CA Rachana Ranade

Your valuable views/Recommendations are most welcomed here!

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