RVNL offered 25.34 crore shares at a price band of ₹17-19 per equity share
Investors had to apply for a minimum of 780 shares or multiples thereof
The IPO of Rail Vikas Nigam Ltd (RVNL) was subscribed 1.78 times as of 5:15 pm today, the last day of the issue. The ₹481-crore RVNL IPO opened for subscription on Friday. The state-owned company offered 25.34 crore shares at a price band of ₹17-19 per equity share. RVNL will be the third rail PSU to be listed after RITES and IRCON. RVNL will not receive any proceeds from the offer for sale since the government is selling about 12% stake in the company. After the IPO, the central government's stake in RVNL will drop around 88%.
RVNL has reserved around 6.5 lakh shares for eligible employees. Both retail investors and employees who bid for the shares will get a discount in the IPO.
RVNL, a central public sector enterprise incorporated by the Ministry of Railways, is in the business of executing railway projects including new lines, doubling, gauge conversion, railway electrification, metro projects, workshops and major bridges. RVNL follows an asset-light model wherein the contractor provides all the machinery, plants and stores for execution of the project.
Elsewhere, the IPO of Metropolis Healthcare opened today and the diagnostics company has fixed a price band in the range of ₹877-880 per share.
RVNL IPO lot size (minimum order or quantity) and retail discount
Investors have to apply for a minimum of 780 shares or multiples thereof. A discount equivalent to ₹0.50 per equity share on the offer price has been offered to retail individual bidders and eligible employee bidders.
Yes Securities (India) Ltd, Elara Capital (India) Private Ltd and IDBI Capital Markets & Securities Ltd are the book running lead managers to the offer.
Alankit Assignments is the registrar to RVNL offer.
Listing of RVNL shares
The equity shares of RVNL will be listed on the BSE and NSE. Trading in the RVNL equity shares is expected to commence within six working days from the date of IPO closing date.
As of 31 December 2018, RVNL’s order book stood at ₹77,504 crore (10.2 times FY18 revenue), which includes 102 ongoing projects. Out of this, Railways accounted for 96.11% of its total order book.
RVNL is paid a consolidated management fee by the Railways based on the annual expenditure incurred for the execution of projects: 9.25% for the metro projects, 8.50% for other plan heads and 10% for national projects.
In FY18, RVNL’s revenue from operations on consolidated basis amounted to ₹7,597 crore and net profit at ₹570 crore, with an EBITDA, or earnings before interest, tax, depreciation and amortization, margin of 5.1%. The company's revenue from operations has increased at a CAGR of 29.36% from FY16 to FY18 while net profit grew at a CAGR of 15.20% during the same period.
What brokerages say
Dolat Capital has a “subscribe for the long term" recommendation for the RVNL IPO. “At the upper band, the stock is valued at P/E of 7x FY18. The PE of its peer company IRCON International ltd is 9.5," Dolat Capital says in a report.
Centrum Broking also recommends “subscribe from a long-term perspective". “Given the government focus on rail infrastructure spends (metro, port-rail connectivity, electrification etc), healthy order book, asset-light model and reasonable valuation, we suggest that investors can subscribe to the issue from a long-term perspective," Centrum says in a note.
Canara Securities, which has a subscribe rating on RVNL IPO, in a note said: "RVNL has a very strong order book with proven execution record. The company is expected to finish around 50% of the order book in the next 2 to 3 years as per the management guidance. However, there is uncertainty with regard to change in the government policy to reconsider the practice of giving railway projects/works on nomination basis to RVNL or to give projects/works to CPSUs through limited competitive tenders. The outcome may have bearing on size of the future order flow and margins. Nevertheless, RVNL commands better bidding prospects due to the proven past record."
Reliance Securities also has a "subscribe" rating, citing valuation comfort.
The other risk factors include a higher dependence on the Ministry of Railways and delays to projects owing to regulatory approvals and contingent liabilities of ₹3,774 crore (as of September 2018).
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