Home >Markets >Stock Markets >Railtel shares end 29% higher vs issue price on listing day

Shares of RailTel Corp of India closed 29% higher on their debut on Friday, after the company’s Rs819 crore initial public offering (IPO) received a robust subscription of over 42 times when it closed earlier this month.

At closing, RailTel shares settled at 29.15% higher at Rs121.40 on BSE from its issue price of 94 a share, while the exchange’s 30-share Sensex index fell 3.8% at 49099.99 points. Earlier in the day, the shares touched a high of Rs125.50 and a low of Rs104.60.

RailTel was the sixth railway company to go public. Earlier offers from the railway stable are Ircon International Ltd, RITES Ltd, Rail Vikas Nigam Ltd., and Indian Railway Catering and Tourism Corp.

Brokerage firm Geojit says 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, GoI’s digital India initiatives and further diversification plans of RailTel, the brokerage firm has assigned a Subscribe rating for the issue.

"The company is going to play a key role in digital transformation of Indian Railways. It’s margins & return ratios are better compared to other telecom players in India. The firm has priced its issue at 21.4x PE on a FY20 trailing basis, which is quite reasonable by looking at the strong future growth rates of the Company", Angel Broking said in its report.

RailTel is an information and communications technology (ICT) infrastructure provider and one of the largest neutral telecom infrastructure providers in India. A neutral telecom infra provider is a third party who has little or no part in providing Internet service to the end-user but allows interconnection between multiple telecommunication carriers (like Airtel, Reliance Jio).

It operates an optic fiber network covering 59,098 route Kms and 5,929 railway stations in India. RailTel developed a retail broadband network and applications to retail customers across India through ‘RailWire’ platform. RailTel has been profitable since FY07 and has consistently paid dividends since FY08.

Income from telecom services (64%) and income from projects (34%) are the main revenue generation activities for RailTel. Fiscal year 2018-20, its revenue grew at a compounded annual growth rate of 7% while net profit grew by 3% CAGR. In FY20, the company reported a profit of Rs.141 crore on revenue of 1128 crore.

In Fiscal 2020, RailTel reported the highest net profit margin of 13%, owing to a zero debt. Reliance Jio Infocomm and Tata Communications followed RailTel with 10% and 4%, respectively, in that period. Railtel's operating profit margin was 30%, whereas Vodafone Idea and Reliance Jio Infocomm was 33% and 40% respectively.

Going forward, the company plans to expand its telecom services and deploy the latest technologies. Further, it plans to continue to invest in expanding its network and deploying the latest technologies to enable a high capacity next-generation network to deliver sustained value to its customers and improve their experience. It also intends to diversify and expand its services and solutions.

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