Rail Vikas Nigam makes tepid stock markets debut, shares end flat

  • RVNL is the first Central Public Sector Enterprise (CPSE) disinvestment in the current fiscal
  • The stock closed at 19.05, up by a marginal 0.26% from its issue price of 19 per share

Mumbai: Shares of Rail Vikas Nigam Ltd (RVNL) made a weak stock markets debut on Thursday. The stock closed at 19.05, up by a marginal 0.26% from its issue price of 19 per share. The initial public offering (IPO) with a price band of 17-19 per share was open for subscription from 29 March to 3 April.

The issue was subscribed 1.83 times and expected to raise about 481 crore. Post the issue, the government aims to cut stake in the company by 12.2%.

Ahead of the IPO, analysts had said that the valuation of the wholly owned government company is reasonable or fair.

According to Canara Bank Securities Ltd, the issue is fairly priced. “As of 31 March, 2018, the company had an earnings per share (EPS) of 2.73 and net asset value (NAV) of 18.83. The company would trade at 6.96 times PE for FY18 earnings," it said in a report on 28 March.

However, brokerage firm said that despite having a very strong order book with proven execution record and expected to finish approximately 30,000 order book in the next two-three years, there is uncertainty with regard to change in the government policy to reconsider the practice of giving railway projects and works on nomination basis. “The outcome may have bearing on size of the future order flow and margins. Nevertheless, Rail Vikas commands better bidding prospects due to the proven past record," Canara Bank Securities added.

As of 31 December 2018, the company’s order book stands at 77,504 crore (10.2 times of FY18 revenue), which includes 102 on-going projects. Currently, the ministry of Railways is a major client for the company. Over FY15-18, it has reported revenue and net profit CAGR of 34.2% and 19.2%, respectively. The company executes projects by raising funds via special purpose vehicle (SPV) route on project specific basis and strategic stakeholders. Its entire borrowing on books is a pass through entry, where railway ministry services the entire debt.

The company executes all types of railway projects including new lines, doubling, gauge conversion, railway electrification, metro projects, workshops, etc. The company generally works on a turnkey basis and undertakes the full cycle of project development from conceptualization to commissioning including stages of design, preparation of estimates, calling and award of contracts, project and contract management, etc. and all stages of project execution up to the stage of commissioning of the new railway lines.

Out of these, 72 projects have been fully completed totaling to 20,567.28 crore and the balance are on-going. During the financial year ending March 31, 2018, it completed a total of 885.50 km of project length which included 315.20 km of doubling and 425 km of railway electrification. Currently, it does not have any national project on its order book.