Indian Railway Finance Corporation (IRFC) initial public offering of about Rs 4,600 crore may hit the markets later this month, a first by a non-banking financial company (NBFC) in the public sector.
“In all probability it (IPO) will be by the third week but, if the market is not okay, then we can go to the first or second week of January also,” Amitabh Banerjee, Chairman and Managing Director, IRFC, said.
The company, the dedicated financing arm of the Indian Railways, will be going for the anchor investment also. “The government is planning to have anchor investors in place for this IPO,” he added.
In January this year, IRFC filed draft papers for its IPO. According to market sources, the IPO is likely to be worth around ₹4,600 crore.
On reasons for bringing the anchor portion, the CMD added that it is a confident market and the anchor investors would be assured of the fact that they will be able to get the desired proportion of issuance without regular bidding. “They will be able to get the amount that they want to invest in IRFC without going for the bidding route. Also, it will give a lot of confidence to other investors in the market who are sitting on the fence,” he said.
The issue is of up to 178.20 crore shares, comprising a fresh issue of up to 118.80 crore shares and offer for sale of up to 59.40 crore shares by the government, according to the draft prospectus. “We are the first NBFC in the PSU sector that is going public for the first time and we shall be paving the way for others,” he added.
On plans to utilise the funds mopped up from the offer, he added that 10 per cent of the issuance will go to the company’s balance sheet and that will increase its net worth and this the firm will be using for raising more money from the market. He further said that this will add to the company’s capability to explore the market further and garner more funds from the market which is the order of the day because the government is in need of funds for its capex expansion outlay requirements.
“Therefore 10 per cent will come to my balance sheet and 5 per cent will go to the government of India’s exchequer,” he added.
Banerjee said the prospect for having a good IPO is “very much bright”. “Everyone (domestic and foreign investors) has a lot of interest in this particular issue. We are extremely hopeful that it will hit the market with a bang,” he said.
Banerjee said Covid-19 has now come as a “blessing in disguise for us” as the market is flushed with funds and investors are looking to invest in safe havens. “Indian Railway Finance Corporation happens to be one of the safest havens as far as investors are concerned,” he added.
Banerjee is hopeful that the IPO will be one of the landmark issuances of the fiscal. “I hope that it will be one of the landmark issuances in this fiscal which augurs well for the other issuances that are coming forward for the government of India in this fiscal,” the CMD said.
The book running lead managers to the issue are DAM Capital Advisors, HSBC Securities and Capital Markets, ICICI Securities and SBI Capital Markets.
Asked about the purpose of this IPO, he said, one of the purposes is to unlock the value that the company has built over so many years of its existence.
“We have already traversed a period of 34 years since its inception in 1986. So, it will unlock the value of the company, it will bring in better corporate governance norms in the organisation which is extremely necessary in any public sector company. That will bring in more transparency in the working of the company,” he said.
The company’s principal business is to borrow funds from the financial markets to finance acquisition/creation of assets which are then leased out to the Indian Railways.
In April 2017, the Union Cabinet had approved listing of five railway companies. Four of them — IRCON International Ltd, RITES Ltd, Rail Vikas Nigam Ltd and Indian Railway Catering and Tourism Corp — have already been listed.