By 10:20 am, the issue had received bids for 16,97,32,595 shares, which was 2.77 times the total issue size of 6,11,95,923 shares. The issue was subscribed 2.64 times on the first day of subscription on Tuesday.
The issue comprises an offer for sale for 87,153,369 equity shares in the price band of Rs 93-94. At the upper limit of this price band, the IPO is valued at 21.4 times PE on an FY20 trailing basis. Its enterprise value (EV) is four times the earnings before interest, tax, depreciation, and amortisation (Ebitda).
Analysts said RailTel is a debt-free company and pays dividends consistently, and thus could witness some traction. But there are a few red flags for long-term investors.
“Firstly, the company has delivered single digit revenue and PAT fromFY18 to FY20. There is high dependence on government entities and concentration risk given that 23.8 per cent of its revenues comes from top three customers. It is present in a highly regulated industry which is another cause of concern.
Other railway infrastructure stocks such as Ircon International, RITES and RVNL are trading at an average PE of 9.5 times.
“But considering the futuristic service & growth plans of the Indian Railways and RailTel’s ability to monetise its existing assets through subscription plans and co-sharing with private operators, we feel that fundamentals are positive for the company. Thus we assign a ‘subscribe’ rating for the issue,” said Choice Broking.
RailTel had on Monday raised Rs 243.99 crore from 14 anchor investors. Foreign portfolio investors who participated were UK-based Aurigin Capital via its Aurigin Master Fund and Utilico Emerging Markets Trust, Reliance Capital managed Cohesion MK Best Ideas Sub-Trust, Singapore based, Integrated Core Strategies Asia and Goldman Sachs India.
