The Rs 645 crore Indian Railway Catering and Tourism Corporation (IRCTC) initial public offering (IPO) is all set to hit the primary market on Monday. The IPO is part of the government's divestment programme, the price band for which has been fixed at Rs 315-320 per share. The company will not receive any proceeds of the IPO, as it is an offer for sale issue. The issue will close on October 03, 2019, following which the government's stake in IRCTC will come down by 12.5 per cent.
Key things to know about the IRCTC IPO
- The IPO is an offer for sale by the government, wherein it is diluting 12.6 per cent stake, amounting to 2.01 crore equity shares. Starting with a minimum bid size of 40 equity shares (and in multiple thereafter), this stake sale will bring down the government's share in IRCTC to 87.5 per cent against 100 per cent stake at present. The floor price and cap prices are 31.5 times and 32 times the face value of the equity shares, respectively.
- Of the total shares on offer, 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. Another 15 per cent of the offer is allocated to the non-institutional investor category (HNI) and 35 per cent will be made available to the retail category. There's an additional discount at Rs 10 per share for the retail category and eligible employees.
- The lead managers for the IRCTC IPO are SBI Capital Markets Limited, IDBI Capital Markets & Securities Limited and Yes Securities (India) Limited.
- IRCTC was incorporated on September 27, 1999, as a public limited company and was conferred a mini-Ratna status by the government on May 1, 2008. IRCTC has diversified into non-railway catering services like e-catering, executive lounges and budget hotels.
- IRCTC's business and revenues are substantially dependent on Indian Railways and any adverse change in the policy of the Ministry of Railways may adversely affect its profitability. The food supply industry in India is largely fragmented and unorganised and the entity depends on a number of local suppliers for their ingredients that participate in the limited tender process from time to time.
- While brokerages hold a positive outlook on IRCTC and see favourable growth prospects with increasing business volumes from catering and packaged drinking water businesses, investors must take note of risks and understand their risk appetite before investing in the IPO.
- IRCTC's stake sale is a part of the Modi government's full-year divestment programme. In total, the Centre aims to raise around Rs 90,000 crore by way of disinvestment of Central Public Sector Enterprises in FY20, up from Rs 85,000 crore in FY19.
Edited by Manoj Sharma