IRFC OFS oversubscribed 1.86 times on Day 1; government exercises green shoe option

The government's offer for sale (OFS) in Indian Railway Finance Corporation (IRFC) received a strong response from institutional investors on the first day, prompting the Centre to exercise the green shoe option. The issue was oversubscribed 1.86 times during the non-retail bidding window on June 24, highlighting continued investor interest in the railway financing PSU despite a discount-led pressure on the stock price.

Retail investors and eligible employees can place their bids on June 25.

Government to sell up to 2% stake

The OFS is part of the Centre's ongoing disinvestment programme for FY27. Initially, the government offered 1% of its equity stake in IRFC and retained the option to sell an additional 1% through the green shoe mechanism in case of strong demand.

Following the robust institutional response, the government decided to exercise the green shoe option, taking the total stake sale to 2%.

According to the Department of Investment and Public Asset Management (DIPAM), more than 26.13 crore shares representing a 2% stake are being offered for sale. At the floor price of ₹91 per share, the transaction is expected to fetch over ₹2,300 crore for the exchequer.

MUST READ: Coal India OFS opens May 27; government plans sale of up to 2% stake

Floor Price

The government fixed the OFS floor price at ₹91 per share, representing a discount of 7.79% to the stock's previous closing price before the issue opened.

The discount weighed on investor sentiment in the secondary market. IRFC shares fell as much as 5.13% during intraday trade to ₹93.60 on the NSE before recovering some losses.

The stock eventually closed at ₹98.69 on the BSE and ₹98.67 on the NSE, down over 2% from the previous session.

Market participants often see temporary pressure on stock prices during OFS transactions because of the discounted offer price and the increase in available shares.

MUST READ: Govt may restart IDBI Bank privatisation process from scratch: Report

Sixth disinvestment transaction

The IRFC OFS marks the sixth stake-sale transaction undertaken by the government in the current financial year.

So far, the Centre has diluted holdings in several public sector enterprises and banks, including:

Company    Stake Sold (%)    Proceeds (₹ crore)
Coal India    2.00    5,542.36
NHPC    6.01    4,357.36
General Insurance Corporation (GIC)    5.00    3,090.47
Central Bank of India    8.08    2,266.13
NLC India    2.73    1,223.57

These transactions have generated approximately ₹16,480 crore in disinvestment receipts so far in FY27.

The government has set an ambitious target of mobilising ₹80,000 crore through stake sales and asset monetisation during the current fiscal year and is expected to continue tapping the capital markets for further divestment opportunities.

Why IRFC matters

Established in 1986, Indian Railway Finance Corporation is the dedicated financing arm of the Ministry of Railways and plays a critical role in funding India's railway expansion and modernisation projects.

The company raises resources from domestic and international capital markets and finances the acquisition of locomotives, coaches, wagons and other railway assets. It also supports major infrastructure projects, including railway electrification, freight corridors and connectivity initiatives.

IRFC operates under a cost-plus financing model that provides stable earnings visibility and predictable cash flows. The company also enjoys Navratna status and a strong credit profile, making it one of the most closely tracked railway-sector PSUs.

With the government continuing to prioritise railway infrastructure and capital expenditure, IRFC remains a key beneficiary of India's long-term transport and infrastructure development plans. The strong response to the OFS suggests investors remain optimistic about the company's strategic importance and growth prospects despite short-term market volatility.