Post issue, the shareholding of government in IRFC will fall to 86.4% as compared to 100% earlier
The price band in Indigo Paints IPO has been set at ₹1,488-1,490 a share for its initial share-sale
The IPOs of Indian Railway Finance Corporation (IRFC) and Indigo Paints will hit the capital markets this week to raise a combined ₹5,800 crore. IRFC issue would be open for public subscription from January 18 to January 20, while the IPO of Indigo Paints would open on January 20 and conclude on January 22. Recent IPOs have seen stellar response from investors, benefiting from the stock market rally.
IRFC IPO comprises sale of up to 178.20 crore shares, comprising a fresh issue of up to 118.80 crore and offer-for-sale of up to 59.40 crore shares by the government. IRFC is issuing shares at a price band of ₹25 to ₹26. The lot size is 575. At the upper end of the price band, the IPO is expected to fetch ₹4,600 crore. Post issue, the shareholding of government in IRFC will fall to 86.4% as compared to 100% earlier.
The IPO of Sequoia Capital-backed Indigo Paints comprises fresh issuance of stocks aggregating to ₹300 crore and an offer-for-sale of up to 58,40,000 equity shares by private equity firm Sequoia Capital and promoter Hemant Jalan. The price band has been set at ₹1,488-1,490 a share for its initial share-sale. The public issue would gather ₹1,170.16 crore at the upper end of the price band.
Ahead of the IPO, IRFC raised ₹1,390 crore from anchor investors. IRFC, set up in 1986, is a dedicated financing arm of the Indian Railways for mobilizing funds from domestic as well as overseas markets.
Pune-based Indigo Paints manufactures a range of decorative paints and has an extensive distribution network across the country. As of September 30, 2020, the company has three manufacturing facilities located in Rajasthan, Kerala and Tamil Nadu. Proceeds from the fresh issuance of shares would be used for expansion of the existing manufacturing facility at Pudukkottai in Tamil Nadu, for purchasing of tinting machines and gyro shakers and repayment/prepayment of borrowings.
Choice Broking in a note has recommended "subscribe" for IRFC issue. "Valuation at P/BV of 1x looks attractive for long term conservative investors, considering strong profitability growth (CAGR of 26.3% during FY18-FY20), double digit RoE at (annualized 12.2% in FY21) and low risk profile of business with zero GNPA," it said.
Nirali Shah, Senior Research Analyst, Samco Securities, said: "IRFC and Indigo Paints got the IPO ball rolling on Indian bourses for 2021. It is expected that a plethora of IPOs will hit the market which may add to the euphoria for more IPOs to follow and this may eventually stop the tap of the present abundant liquidity. It is quite obvious that the rate at which developed economies are pursuing quantitative easing is quite substantial when compared to the rate at which IPOs are hitting markets. So the liquidity is here to stay in our system for some more time but the beginning is well underway wherein the financial markets’ liquidity is being channelized in the real economy by IPOs and FPOs. Investors are advised to subscribe to these IPOs in the current environment of liquidity gush and encash profits as and when the opportunity strikes."