Home >Markets >Ipo >RailTel IPO updates: Issue subscribed over 42 times

The IPO of RailTel Corporation of India has attracted strong demand and the issue was fully subscribed in just few hours after it opened on Tuesday. The price range has been fixed at 93-94 per share. Ahead of the IPO, RailTel had raised 244 crore from 14 anchor investors including UK-based Aurigin Capital, Utilico Emerging Markets Trus tand Goldman Sachs India. Domestic investors like HDFC Life Insurance Company, ICICI Prudential MF, Aditya Birla Sun Life Insurance, Tata MF, Edelweiss AIF also participated in the anchor investment round. The issue closed today.

As of 5 pm on Day 3, the issue was 42.39 times subscribed.

Here are 10 things to know about RailTel IPO:

1) RailTel, which is wholly-owned by the Government of India and under the administrative control of the Ministry of Railways, is an information and communications technology (ICT) infrastructure provider and one of the largest neutral telecom infrastructure providers in India.

2) It operates an optic fiber network covering 59,098 route km and 5,929 railway stations in India.

3) In this offer for sale, the government is selling 87.15 million shares, or a 27.16% stake and plans to raise around 819 crore.

4) 35% of the issue is reserved for retail investors while the lot size in RailTel IPO is 155.

5) Tentative timeline: The share allocation in RailTel IPO is likely to be finalised on February 23 and listing may happen on February 26, according to brokerages.

6) KFin Technologies Private Limited is the registrar of RailTel IPO and will manage share allocation and refund. The offer is being managed by ICICI Securities Ltd, IDBI Capital Markets & Securities Ltd, and SBI Capital Markets Ltd.

7) "For FY18-20, RailTel's revenue grew at a CAGR of 7% while net profit grew by 3% CAGR. In FY20, the company had reported PAT of Rs.141 crore on revenue of Rs.1,128 crore," says Geojit, which has a subscribe rating on the issue.

8) "At the upper price band of Rs.94, RailTel is available at a P/E of 21.4x on FY20 basis, which appears fully priced. Considering, increasing data usage, govt’s Digital India initiatives and further diversification plans of RailTel, we assign a Subscribe rating for the issue," the brokerage said.

9) Religare Broking said in a note said: "The financial performance of the company has been tepid with revenue/PAT CAGR of 7.5% and 2.6% over FY18-20. However, it has consistently paid a dividend since FY08. On the valuation front, the company is valued at a PE of 21.4x FY20 EPS. From a long-term perspective, investors can consider applying for the IPO."

10) Nirali Shah, Head of Equity Research, Samco Securities, says Covid-19 has had a minimal impact on the telecom industry and has in fact triggered growth for certain players due to increased data usage and VPN services for people working from home.

"RailTel is a debt free company and pays consistent dividends. There is high dependence on government entities and concentration risk given that 23.8% of its revenues comes from top 3 customers. Its presence in a highly regulated industry is another cause of concern. Over all, the company is fairly priced at its FY20 P/E of 21.3 times. It has been commanding a good grey market premium indicating the offer will sail through but keeping the risks in mind, we recommend investors to subscribe for listing gains."

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