Indian Railway Finance Corporation Limited, IRFC IPO is going to launch it’s IPO on January 18, 2021. IRFC is the dedicated market borrowing arm of the Indian Railways.
IRFC primary business is financing the acquisition of rolling stock which includes both powered and unpowered vehicles, for example locomotives, coaches, wagons, trucks, flats, electric multiple units, containers, cranes, trollies of all kinds and other items of rolling stock components as enumerated in the Standard Lease Agreement, leasing of railway infrastructure assets, national projects of the Government of India, and lending to other entities under the Ministry of Railways (MoR), Government of India (GoI).
The period of lease with respect to Rolling Stock Assets is typically 30 years comprising a primary period of 15 years followed by a secondary period of 15 years.
It is wholly-owned by the Government of India acting through the MoR (Ministry of Railways). In FY 2018, 2019 and 2020, it was responsible for financing 93%, 84% and 76%, respectively, of the rolling stock purchased by it and leased to the MoR.
In this post we will not only know about all the details related to IRFC IPO, such as Issue size, Issue type, Bid lot, price range, issue date, Cut-off timings but also about the financials step by step.
So, Let us first start by knowing in brief about Indian Railway Finance Corporation Limited (IRFC).
About Indian Railway Finance Corporation Limited (IRFC):
As said above, Indian Railways Finance Corporation, IRFC is responsible for financing the railways huge operation. IRFC is a government-owned NBFC that caters to the Indian Railways and its many subsidiaries.
IRFC helps Indian railways by financing Rolling Stock. Rolling stock in simple terms refers to anything that moves on railway tracks. For example, locomotives (engines), freight wagons, passenger coaches, railroad cars etc.
Having said that, you may think IRFC only job is to finance and extends loans to the Ministry of Railways (MoR), no that’s not the only thing they do. Yes, IRFC, buy the rolling stock directly and lease it to the MoR. Apart from that they also finance development projects such as decongestion/expansion of tracks and electrification of railway lines.
By doing this, they transfer both the ownership and the risk associated with said assets for the duration of the lease, that usually lasts about 30 years.
In the meantime i.e. the first 15 years, the company receives lease rentals biannually which pays for both the principal and the interest associated with financing the asset purchase.
Afterwards they receive a nominal amount of 1 lakh every year, during which IRFC recovers the entire value of the asset and then some. At the end of the lease term, MoR buys the assets for Rs. 1 as a formality.
As mentioned above, In FY 2018, 2019 and 2020, IRFC was responsible for financing 93%, 84% and 76%, respectively, of the rolling stock purchased by it and leased to the MoR.
But here is the problem, most lease agreements don’t offer higher interest rates for IRFC. For example, If the IRFC borrows money at 6.5% for instance, then they might try and get an extra 0.4%-0.5% from the MoR. But having said that they don’t just make money off of rolling stock only as explained above.
Let us now move on to knowing the most important factor that is, the financials of IRFC.
Financials Of Indian Railway Finance Corporation Limited (IRFC):
The most important thing before applying for an IPO is to know the financial condition of a company, let us know how IRFC as a company stand. Checkout the image below to know:
- In FY 2020, it financed ₹713.92 billion accounting for 48.22% of the actual capital expenditure of the Indian Railways
- It has received the highest credit ratings from CRISIL – CRISIL AAA and CRISIL A1+, ICRA – ICRA AAA and ICRA A1+ and has diversified sources of funding like taxable and tax-free bonds issuances, term loans from banks/financial institutions etc.
- Its total revenue from operations increased by 19.33% from ₹92,078.39 mn in FY 2018 to ₹1,09,873.55 mn in FY 2019 and by 22.15% to ₹134,210.90 mn in FY 2020.
Together, all of these businesses have performed reasonably well for IRFC. Right now the company’s top line stands at 13,400 crores. Even net profits surged 59% — From Rs 2,000 crore to Rs 3,192 crore .
Let us now see how much rolling stock have been financed by IRFC to MoR. Checkout the below image:
Till date, the Indian Railways has deployed 289,185 freight wagons, 74,003 passenger coaches, 12,147 locomotives and a total running track of 95,981 kilometers across the country with help of IRFC.
IRFC Important Financial Summary:
IRFC Profit & Loss Statement:
IRFC Balance Sheet Details:
So, overall the company financials does look good, moreover with growing economy the infrastructure development of Indian railways will continue, so is the revenue and monopoly of IRFC in its industry.
Now, Let us move on to the IRFC IPO and know everything in detail.
IRFC IPO Details:
Object Of The Issue:
Augmenting equity capital base to meet future capital requirements arising out of growth in business.
IRFC Shareholding Pattern (%)
Pre-Issue – Promoter Group – 100.0, Public – 0.0
Post-Issue – Promoter Group – 86.3 , Public – 13.7
IRFC IPO Issue Details:
Initial Public offer up to 1,78,20,69,000 equity shares of face value of Rs. 10 each (Equity Shares) comprising of a fresh issue of up to 1,18,80,46,000 Equity Shares (Fresh Issue) and an offer for sale of up to 59,40,23,000 Equity Shares.
IRFC IPO is opening on 18 January, 2021 and Issue will get close on 20 January, 2021. The IRFC IPO price band is Rs.25 to 26, the minimum lot size is 575. As an retail investor to bid for 1 lot for IRFC IPO you will need about Rs.14375 – 14950.
Maximum Subscription Amount for Retail Investor is Rs. 2,00,000 and Maximum Subscription Amount for Eligible Employee is Rs. 5,00,000
Whereas, Maximum Bid Quantity for QIB Investors is 1,24,73,13,575 equity shares, in multiple of 575 Equity Shares
For NIB Investors Maximum Bid Quantity is 89,09,37,775 equity shares, in multiple of 575 Equity Shares
IPO Market Timings 10.00 a.m. to 5.00 p.m.
Book Running Lead Managers is DAM Capital Advisors Limited (formerly known as IDFC Securities Limited), HSBC Securities and Capital Markets (India) Private Limited, ICICI Securities Limited, SBI Capital Markets Limited.
Name of the Registrar is KFin Technologies Private Limited
Address of the Registrar is Selenium Tower-B, Plot 31 & 32, Gachibowli, Financial District, Nanakramguda, Serilingampally, Hyderabad 500 032, Telangana
Contact person name number and Email id M. Murali Krishna, +91 40 6716 2222, [email protected]
Below are some of the investment tips before applying to IRFC IPO.
Important Things To Keep In Mind Before Applying For IPO’s:
- Try to fill for the same IPO online from different DP ID i.e. if in your family have more than 1 account you can possibly get the allocation done in case of over subscription.
- You should have a good knowledge of the sector and the company you are planning to invest.
- Analysis of the company’s balance sheet is very crucial. A clear understanding of the company’s future projects and vision is very necessary to know whether it will have a sustainable future.
- Investment decision has to be taken carefully and not in a hurry.
- Read as much as you can about the company, its objectives for launching the IPO, its past history in business and its futures prospectus.
- Don’t go for hype in the news, your analysis should be based on facts rather than gossips and rumors.
- Many IPOs are oversubscribed. What this means is that the demand for shares is much higher than the shares available for sale. In such a situation, it is no surprise that many investors fail to get any shares allotted to them. This is why it is advisable to apply for IPO shares on the last day of bidding. This way, one can have a good estimate on how large the subscription will be. Also, in that case, one should bid for just one lot and not unnecessarily lock up their capital.
Indian Railways is a corporate prodigy. It’s a public sector undertaking whose influence reaches every corner of India. As It caters to an almost 1.3 Billion population the growth trajectory does look fantastic for future.
Applying for IRFC IPO is quite simple, you just need to check with your broker as most of the stock broker in India provide you the platform to apply directly through their portal instead of ASBA process or from bank.
The only thing which should be bothering you is the research you did before applying for the IPO. Investing in IPO is risky as well as profitable. Having said that you also need to keep in mind important things mentioned above before applying to IPO’s as the risk is always involved.
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