The Indian Railway Catering and Tourism Corporation (IRCTC) filed the draft red herring prospectus for its proposed IPO with the Securities and Exchange Board of India (SEBI) on Thursday. This is the only entity authorised by Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India. While the document does not mention offer size, speculation is rife that it will be in the Rs 500-600 crore range.
The issue comprises 2 crore equity shares of face value of Rs 10 each, of which up to 50 per cent will be available for allocation to qualified institutional buyers (QIBs), including 2 lakh equity shares for the mutual fund portion on a proportionate basis. In addition, not less than 30 lakh equity shares, or 15 per cent of the total offer, will be available to non-institutional bidders and at least 35 per cent to retail individual bidders.
"The Employee Reservation Portion [which depends on government approvals] shall not exceed 5 per cent of the post-offer share capital of our Company or increase the size of this Offer by more than 50 per cent," the draft prospectus stated. Eligible employees bidding in this category can bid up to Rs 5 lakh net of employee discount. "However, a Bid by an Eligible Employee in the Employee Reservation Portion will be considered for allocation, in the first instance, for a Bid Amount of up to Rs 200,000 (net of Employee Discount)," it said, adding that any unsubscribed portion will be available for allocation proportionately to all eligible employees who have bid in excess of this threshold. If it is still undersubscribed, the remaining portion "shall be added to the net offer".
IRCTC said that it will sign the Underwriting Agreement on or immediately after the finalisation of the offer price, post which it will file an updated Red Herring Prospectus with the Registrar of Companies (RoC). The Red Herring Prospectus will be registered with the RoC at least three working days before the bid opening date.
In April 2017, the Cabinet Committee on Economic Affairs had approved listing of five railway companies, namely IRCON International, RITES Ltd, Rail Vikas Nigam Ltd (RVNL), Indian Railway Finance Corporation (IRFC) and IRCTC. Of these, IRCON International and RITES were listed in 2018-19, and in April, the government raised about Rs 480 crore by selling about a 12 per cent stake in RVNL. The IRFC IPO is expected to garner around Rs 1,000 crore for the government.
The book running lead managers to the IRCTC IPO are IDBI Capital Markets & Securities Limited, SBI Capital Markets Limited and Yes Securities (India) Limited. The document added that IRCTC "does not contemplate any issuance or placement of Equity Shares from the date of this Draft Red Herring Prospectus till the listing of the Equity Shares".
IRCTC claims to operate one of the most transacted websites in the Asia-Pacific region, with transaction volume averaging 15-18 million transactions per month during the first quarter of this fiscal. As of June 30, more than 1.40 million passengers travelled on Indian Railways on a daily basis.
If the IPO is successful, it will help the Modi government meet its disinvestment target of Rs 1.05 lakh crore for the current fiscal. The government has budgeted to raise Rs 90,000 crore by way of CPSE disinvestment in the current fiscal, up from Rs 85,000 crore in FY19.