RailTel Corporation IPO- the seventh public offering of 2021-will open for subscription today. The IPO is available at a price band of Rs 93-94 per share, with face value of Rs 10 apiece. The public offer of the Mini-Ratna company will close on February 18.
State-owned RailTel Corporation of India IPO is a complete offer for sale of 8,71,53,369 equity shares by the Government of India. and is worth Rs 819.24-crore.
The minimum market lot size for the IPO is 155 shares, where an individual investor can apply for up to 13 lots (2015 shares or Rs 189,410).
As per the company's DRHP, the net proceeds from the IPO of the Mini-Ratna category company will be used for carrying out the disinvestment plan and to achieve the benefits of equity share listing. The company will not receive any proceeds from the offer.
Half of the issue is reserved for qualified institutional buyers, while 35% portion has been fixed for retail investors segment and the remaining 15% for non-institutional bidders.
KFin Technologies Private Limited is the registrar of RailTel IPO, while ICICI Securities, IDBI Capital, SBI Capital Markets are merchant bankers to the issue. RailTel shares are proposed to be listed on BSE and NSE on February 26.
Incorporated in 2000, the Information and Communication Technology (ICT) infrastructure provider company has covered an optic fibre network of over 55,000 Km and 5,677 railway stations as of June 30, 2020 and has data centres in Haryana, Gurugram, Secunderabad, and Telangana.
Expert take on RailTel IPO
Geojit Financial Services assigned a Subscribe rating for the issue, considering increasing data usage, GoI's digital India initiatives and further diversification plans of RailTel. The brokerage said," In FY20, RailTel had the highest net profit margin among key telecom companies and key IT/ICT companies in India, with a profit margin of 12.5%. The company expects strong growth in the data center services in the future as the government plans to invest in smart cities, health, e-office projects, and education. RailTel to expand its operations outside India to countries like Bangladesh, Kenya and Mauritius.Some big-ticket Projects include KFON for Kerala, Bharat Net, National Knowledge Network (NKN) and Railway modernizing with an order book of Rs 4,000 crore. 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."
Ajit Mishra, VP Research, Religare Broking said that investors can consider applying for the IPO from a long-term perspective, and added," Rail Tel serves as a key network for the Indian Railways. It provides a variety of services to the Indian Railways and has implemented MPLS data network for integrated payroll and accounting system, unreserved ticketing system, freight operations information system and coaching operations information systems. Going forward, the company plans to expand its telecom services and deploy the latest technologies. It intends to create open radio access networks, small cell and tower infrastructure at railway stations for hosting telecom players to assist with their preparation for the 5G network. 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. 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."
Choice Broking said in its note today," At the higher price band of Rs. 94 per share, RailTel's share is valued at an FY20 P/E multiple of 15.8x (to its restated EPS of Rs. 5.9). Other railway infrastructure companies (IRCON, RITES and RVNL) are trading at an average P/E of 9.5x. However, considering the futuristic service & growth plans of the IR and RailTel's ability to monetize its existing assets through subscription plans and co-sharing with private operators, we feel that fundamentals are positive for the company. Thus we assign a SUBSCRIBE rating for the issue."
Reliance Research said in its note, "RailTel's financials are not that encouraging. While its revenue recorded 7% CAGR over FY18-FY20, its net profit clocked by a mere 3% CAGR during the same period. It has been maintaining strong margins profile with EBITDA margins remaining in the range of 28-30% and net margin at 12-14%. RAILTEL is a debt-free company despite being into capital intensive business, which offers an edge. Further, RoE at 10% in FY20 does not look to be impressive despite strong margins."RailTel IPO opens tomorrow: Check price band, lot size & other details
The brokerage further added, "The IPO is valued at 21.4x EPS and 8.9x EBITDA for FY20, which looks to be reasonable. However, given huge opportunity emanating from government's railway transformation agenda and programme to connect 6 lakh villages in 1,000 days in the vicinity of railway stations, RAILTEL is expected to sustain its growth trajectory. Further, there is no listed peer of the company. However, it enjoys a better return profile and balance sheet compared to other listed telecom players. The company has been paying a consistent dividend over the years and continues to remain profitable since FY07, which offers comfort. Hence, we recommend SUBSCRIBE to this issue."