Home > companies > news > Ircon’s IPO sees 29% subscription on day 1

New Delhi/Mumbai: Ircon International’s initial share sale was subscribed 29% on Monday, the first day of the bidding process, according to the National Stock Exchange (NSE).

The three-day IPO, which will close on Wednesday, received bids for 2.89 million shares against an issue size of 9.9 million, according to the NSE website.

Established in 1976, Ircon International is the second Indian Railways subsidiary which is being divested. Earlier this year, the Rites Ltd IPO was subscribed 67 times.

According to the disinvestment plans for Ircon, the government is selling a 10% stake to fetch 467 crore. The company is debt-free and has an order book of 22,406 crore as of March. It also has presence in Sri Lanka, Bangladesh, Malaysia, South Africa and Algeria.

The stock is available at 10.7-10.9 times the company’s FY18 earnings per share, said ICICI Securities Ltd. “Adjusting for subsidiary investments worth 700 crore, the issue is available at 9.2 times FY18 EPS on higher band, which is attractive," the brokerage firm said in a note on 12 September.

Over FY15-17, Ircon’s financials were muted, but picked up in FY18, recording revenue and net profit growth of 31% and 24%, respectively.

Ircon’s order book was at 22,400 crore in FY16-18 with a 12.9% compound annual growth rate (CAGR). Of the total projects, railways comprise 86.7%, highways make up for 5.6% and electrical works contributes 5.4%. The remainder 2.2% is from the building sector.

According to Motilal Oswal Securities Ltd, a significant portion of contracts were awarded on a nomination basis and, hence, the government policy could materially impact financials of the company, which is risky.

IDBI Capital Markets, IDBI Securities, Axis Capital and SBI Capital Markets are managing the share sale.

“The response has been low as compared to our expectations. With RITES subscription around 60% on the first day, we were hopeful of a better response. However, we still have two days to go and are hopeful of it getting fully subscribed," said a senior railway official, requesting anonymity.

The NDA government has reduced its PSU disinvestment target from 1.03 trillion last year to 80,000 crore for this fiscal. Till the first quarter of the current financial year, the government had managed to raise around 9,000 crore through the Rites issue and Bharat-22 ETF.

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