Tag: indian railways

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Market News Top 10 News

Govt Plans to Sell IRFC Shares – Top Indian Market Updates

Here are some of the major updates that could move the markets tomorrow:

Govt plans to sell IRFC shares through offer for sale

The government is planning to sell a part of its holding in state-owned Indian Railway Finance Corp (IRFC) through an offer for sale (OFS) in the current financial year (FY24). The govt currently holds an 86.36% stake in the financing arm of the Indian Railways. To make the central public sector enterprise compliant with SEBI’s minimum public shareholding (MPS) norm, the government has to dilute its 11.36% stake in IRFC.

Read more here.

Petrol, diesel sales fall in Aug as rains hit demand

According to preliminary data from state-owned oil firms, India’s petrol and diesel consumption fell in the first half of August compared to the previous month and a year ago as monsoon rains hit mobility and slowed industrial activity. Consumption of diesel fell 5.7% YoY to 2.67 million tonnes from August 1 to 15. Petrol sales fell 8% YoY to 1.19 million tonnes during the same period.

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Coal India capex spending grows 8.5% to Rs 4,700 cr in Q1

Coal India Ltd’s capital expenditure (capex) rose 8.5% YoY during April-July (Q1) to ₹4,700 crore as it continued to invest heavily in evacuation infrastructure, land, and mining machinery. The capex spend during the first four months of FY24 was almost 100% of the target of ₹4,754 crore and 28.3% of the annual target of ₹16,600 crore.

Read more here.

Lupin gets USFDA approval for Bromfenac Ophthalmic Solution

Lupin has received approval from the US Food & Drug Administration (USFDA) to market its generic Bromfenac Ophthalmic Solution. The drug is used to treat post-operative inflammation in patients who have undergone cataract surgery. The product will be manufactured at Lupin’s Pithampur facility in Madhya Pradesh

Read more here.

Amara Raja to expand into 2-wheeler market to power growth

Amara Raja Batteries plans to expand into the two-wheeler electric vehicle (EV) market through chargers and batteries as part of an expansion to triple its lithium-ion business this financial year. The company is also banking on its upcoming lithium cell and battery pack manufacturing units to increase production by Q1 FY25.

Read more here.

Cabinet approves 7 projects for Indian railways

The Union Cabinet has approved seven multi-tracking projects targeted at Indian Railways with an outlay of ₹32,500 crore. The said projects will add 2,339 kilometres to the existing network of Indian Railways. They will cover 35 districts across Andhra Pradesh, Bihar, Gujarat, Jharkhand, Maharashtra, Odisha, Telangana, Uttar Pradesh and West Bengal.

Read more here.

Telecom services industry revenue growth may slow to 7-9% in FY24: ICRA

Ratings agency ICRA said the telecom services industry is expected to report moderate revenue growth of around 7-9% in FY24 due to muted average revenue per user (ARPU) expansion in the absence of tariff hikes. The capital expenditure levels of telecom firms are expected to remain elevated as they expand 5G coverage. This would keep the debt levels of the industry high at around ₹6.1-6.2 lakh crore as of March 2024.

Read more here.

Nazara Technologies invests ₹4.15 crore in Snax Games

Nazara Technologies Ltd has invested approx ₹4.15 crore (via its wholly owned Singapore subsidiary Nazara PTE Ltd) in Israel-based game developer Snax Games Ltd. The company entered into a publishing agreement with Snax Games through which it has acquired the exclusive rights to publish the games in the Indian subcontinent and the Middle-East region on a revenue-sharing basis for five years.

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GQG picks up 8.1% stake in Adani Power

US-based investment firm GQG Partners has invested $1.1 billion (~₹9,150 crore) in Adani Power for an 8.1% stake. GQG Partners bought 31 crore shares of Adani Power in the largest ever secondary market equity deal, and promoter Adani family sold the stake for over ₹9,000 crore. With this investment, GQG Partners has bought ₹34,000 crore ($4.2 billion) in Adani group companies since March this year.

Read more here.

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Market News Top 10 News

Govt to Sell Entire 26.12% Stake in Tata Communications – Top Indian Market News

Govt to sell entire 26.12% stake in Tata Communications

The Indian government will sell its entire 26.12% shareholding in Tata Communications Limited (TCL). It will sell up to 4.59 crore equity shares (forming 16.12% shareholding) of TCL through an offer for sale (OFS) via stock exchanges. The remaining 10% stake will be sold to Tata Son’s investment arm Panatone Finvest Ltd. Tata Sons currently owns 14.1% of TCL, while Panatone Finvest has a 34.8% stake in the company.

Read more here.

SpiceJet introduces 66 new flights in domestic network

SpiceJet Limited has announced 66 new domestic flights to meet the increasing demand for air travel from smaller cities. This includes five additional non-stop flights from Pune to Darbhanga, Durgapur, Gwalior, Jabalpur, and Varanasi. Kolkata–Darbhanga, Chennai–Jharsuguda, and Nashik-Kolkata flights are among others that will be launched on March 28, 2021. The airline will press its Boeing 737 and Bombardier Q400 aircraft into service on these new routes.

Read more here.

Dilip Buildcon gets provisional completion certificate for road project in Maharashtra

Dilip Buildcon Limited has received a provisional completion certificate from the National Highways Authority of India (NHAI) for a road project in Maharashtra. The project involved four/six-laning of the Karodi-Telwadi section of NH 211 in Maharashtra under NHDP Phase IV-B on an engineering, procurement, and construction (EPC) mode. The company is entitled to receive a bonus of Rs 5.08 crore for completing the project 30 days before the scheduled completion date.

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Finance Ministry to infuse Rs 14,500 crore in banks under PCA soon: Report

As per reports from multiple sources, the Finance Ministry is likely to infuse Rs 14,500 crore into banks that are under RBI’s Prompt Corrective Action (PCA) framework in the next few days. This will help improve the financial health of stressed public sector banks (PSBs) in the country. Indian Overseas Bank, Central Bank of India, and UCO Bank are currently under the PCA framework. Earlier this week, IDBI Bank was removed from this framework.

Read more here.

Indian Railway’s freight loading for FY21 surpasses that of last financial year

Indian Railways has surpassed freight loading figures of the previous financial year (FY 2019-20) despite challenges faced due to the Covid-19 pandemic. As per government data, Railways achieved a cumulative freight loading of 1145.68 million tonnes (MT) as of March 11, 2021. The figure stood at 1145.61 MT during the same period last year. The loading of iron and steel, cement, and other goods has increased.

Read more here.

Bitcoin surges past $60,000 to hit a record high

Bitcoin has crossed the $60,000-mark to hit a new record high on Saturday. The cryptocurrency is benefitting from optimism in financial markets after US President Joe Biden signed the $1.9 trillion Covid-19 relief package. Bitcoin has surged around 1,000% over the past year and has a market value of $1.12 trillion.

Read more here.

IIFL Finance to close bond issue early on March 18

IIFL Finance Limited said that its bond issue will close on March 18 following better than expected response from investors. The issue of unsecured redeemable non-convertible debentures (NCDs) was scheduled to close on March 23. The NCDs, which offer up to 10.03% yield, have already been subscribed for Rs 468 crore. IIFL Finance is a non-banking financial company backed by the UK-based CDC Group.

Read more here.

India’s FinTech industry valuation estimated at $150-160 billion by 2025: FICCI-BGG report

According to a report from Boston Consulting Group (BCG) and FICCI, India’s financial technology (FinTech) companies are likely to become three times more valuable in the next five years. The report states that the FinTech sector will reach a valuation of $150-160 billion (~Rs 10.9 lakh crore- Rs 11.6 lakh crore) by 2025. India’s dynamic FinTech industry has over 2,100 companies, of which 67% have been set up over the last 5 years alone.

Read more here.

India imposes anti-dumping duty on Chinese antibacterial drug

The Indian government has imposed anti-dumping duty in the range of $0.91-$3.27 per kilogram on the Chinese antibacterial drug- Ciprofloxacin. The Directorate General of Trade Remedies (DGTR) had recommended imposing the duty after it found that the drug was being exported to India at a cheaper rate, which resulted in dumping. The anti-dumping duty has been imposed for a period of five years. This will help protect the domestic pharma industry.

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Editorial

RailTel IPO: Should You Invest?

RailTel Corporation of India Limited has come up with an IPO. The issue opens on February 16, 2021, and closes on February 18, 2021. RailTel Corporation of India Limited is an Information and Communications Technology (ICT) company. You might have heard about RailTel broadband near your houses. It is a Mini Ratna (Category I) PSU, wholly owned by the Government of India and run by the Ministry of Railways. Let us find out more about the IPO.

The Business of RailTel

RailTel was incorporated on Sept. 26, 2000, in order to modernize the existing telecom infrastructure for train control, operation, and safety. It also aimed to generate additional revenue by creating a nationwide broadband and multimedia network by laying optical fiber cable by using the right of way(ROW) along the railway tracks. It intends to host telecom players at railway stations and assist them in disbursing 5G networks.

The company provides a number of services such as:

  • Telecom Network Services: National Long Distance to carry long-distance telecommunication services and includes various teleservices including voice, data, fax, text, video, and multimedia. Also, act as an internet service provider(ISP) and offer retail broadband services through the ‘RailWire’ platform.
  • Telecom Infrastructure Services: To provide storage, power, cooling, and physical security for servers and networking equipment of our customers and connect them with a variety of telecommunications and network service providers.
  • Projects (System Integration Services): National Knowledge Network and Bharat Net (formerly, the National Optical Fiber Network).
  • Data Center and Managed Hosting Services: Data Centre and Managed Hosting Services: It offers a variety of data center services including Infrastructure as a Service or IaaS, dedicated hosting, managed services, cloud computing, managed e-Office services, disaster recovery services, Aadhar authentication services, and other IT related services such as load balancing services, application hosting, bandwidth services, and advanced firewall services
  • ICT Hardware, Software, and Service System Integration Projects
  • To Provide Digital Services To Customers

Financial Position of RailTel

  • The company revenue has grown at ~7.5% CAGR for FY20. Earnings Before Interest, Tax, Depreciation, and Amortization(EBITDA) has grown at ~4.5% over 3 years. The company’s net worth has grown ~3.6% over the past 3 years.
  • The company holds a net profit margin of 13% and close to zero-debt.
  • It has right of way along 67,145 route km of railway track connecting 7,321 railway stations for laying optical fiber cables. As of now, It has an optical cable network of 59,098 route km connecting 5,929 railway stations.

Risk and Rewards

  • The company will help set up internet and broadband services in rural areas. The Indian Railways’ connectivity even in the remotest corners of the country will be an added advantage to its revenue source. At the same time, the company will not have to pay for fixed land assets as it will be using the railway track’s right of way to lay cables.
  • It has helped the Indian Railways in implementing payroll system, ticketing system, freight operations information system and is currently involved in the execution of various other projects. RailTel is required to share 7 percent of its gross revenue with Indian Railways.
  • The company will also have an added advantage with the upcoming 5G infrastructure. Telecom companies might prefer using RailTel’s infrastructure because of its efficiency and geographic reach. 
  • It holds regulatory risks like changes in laws, license terms, and government policies that can potentially affect the business. The company needs to keep pace with growing technology, it can lose customers and subscriber base. 
  • The company has a high dependence on PSU customers. For FY20, close to 25% of its income from Indian Railways. The Government prefers RailTel as a service provider in telecom and network-infra related services for other PSUs. If the PSUs were to have a change in investment plans, the company might take a dip in revenue. It needs to increase its private customer base. 

The IPO in a Nutshell

IPO Opening DateFeb 16, 2021
IPO Closing DateFeb 18, 2021
Issue TypeBook Building
Face ValueRs 10 per equity share
IPO PriceRs 93 to Rs 94 per equity share
Lot Size155 Shares
Min Order Quantity155 Shares/ Rs 14,570
Listing AtBSE, NSE
Issue Size87,153,369 Eq Shares of ₹10(aggregating up to Rs 819.24 Cr)
Offer for Sale87,153,369 Eq Shares of RS 10(aggregating up to ₹819.24 Cr)

The entire issue is Offer for Sale, that is, promoters getting money. No extra funds are being raised by RailTel from this IPO. Do not apply for more than 1 lot, as the issue will be oversubscribed anyway.

Will we Invest?

RailTel Corporation of India Limited has had a grey-market premium of 50%. It has seen more interest in the market than its competitor IRFC, which had a not-so-good IPO listing. It is the 6th railway company to go for an IPO. RailTel has shown a fairly good financial performance, but very innovative and strong growth potential. It had shown a good interest from retail investors.

The company needs to look out for private clients, currently, the company only serves major PSUs including the Indian Railways. This is reflecting in its slow but positive revenue growth. The consumer-facing side of the business has also been gaining a lot of buzz recently for the good service being provided, but it is still small. Hopefully, this is sustained in the long term.

Considering the strong financials, good valuation and market sentiments, the IPO can give a good return both for short term and long term and I will be investing.

Categories
Editorial

Indian Railway Finance Corporation Limited IPO: All You Need to Know

2020 was unmemorable for a lot of reasons but Initial Public offers (IPO) is not one of them. Out of the 16 IPO launched in 2020, 12 IPO gave investors the much-desired listing gain. You can read about the top 5 IPOs of 2020 here. 

The Indian Railway Finance Corporation (IRFC) has decided to take the public route. They will be the first company coming with its IPO in 2021. The IPO will hit the market on 18th January 2021. Let’s dig deeper and understand what it is all about.

About the Company

The Indian Railway Finance Corporation (IRFC) was incorporated in 1986. It is fully owned by the Government of India. The main role of IRFC is to act as a borrowing arm of Indian Railways. It is responsible for raising funds for the Ministry of Railways (MoR). The primary business of IRFC is to finance the acquisition of rolling stock assets. These stock assets consist of wagons, trucks, electric multiple units, containers, cranes and more.

India has a huge railway network with approximately 13,452 trains every day. In fact, India holds the largest rail network in Asia as it transports 22.70 million passengers per day (FY18). IRFC has financed almost 40% of the total expenditures carried out by Indian Railways in 2019-20. 

About the IPO

https://twitter.com/SecyDIPAM/status/1349218668316540928

The IPO of this state-run company will open on 18th January and will close on 20th January. The total issue size of the IPO is Rs 4,600-crore. A total of 178.2 crore equity shares will be offered by IRFC as their move to go public. It comprises a fresh issue of up to 118.8 crore shares and an offer for sale of up to 59.4 crore equity shares. The price band of the IPO is Rs 25-Rs 26 per equity share.

Anchor investors have been allocated 60% of the total portion reserved for qualified institutional buyers (QIBs). As the price of the shares is low, you are required to buy at least 575 equity shares as one lot. Further bids can be made in multiples of 575 shares. That means an investor who is looking to invest in this IPO has to at least pay Rs 14,950 (Rs 26 x 575). The maximum a single investor can invest is Rs 1,94,350. But since the IPO will be oversubscribed anyway, there is no point in applying for more than one lot.

Mostly, there are two reasons why IRFC has decided to take the public route. Firstly, to increase the company’s equity capital base and make it more robust. This will help them to meet business future growth requirements. Secondly, to meet general corporate purposes. 

Financial Overview

30 September 202031 March 202031 March 201931 March 2018
Total Assets2,91,986.582,75,504.122,06,438.291,61,451.04
Total Income7,384.0013,421.0911,133.599,268.38
Profit after Tax1868.843192.092139.932,001.46
(Values in Rs Crore)

As you can see from the table, the revenues and profits have increased consistently for the last three years. IRFC recorded a 20% increase in revenues in FY20 as compared to FY19. Their profits rose by a stunning 50% from Rs 2139.93 crore to Rs 3192.09 crore in just one year. This tells us that the company has done well in recent times. Till the first half of 2020-21, we can see that the company has also accumulated revenue worth Rs 7,384 crore. With this trend, they will easily surpass their numbers of the previous year.

The biggest strength of IRFC is its pivotal role in the growth of Indian Railways. Most of the Indian population, especially the lower-middle class population, travels through trains. They find travelling through the air very costly. Thus, Indian Railways, which is still very cheap, is their preferred option. Indian Railways will only expand from where they are right now. This expansion will involve a significant amount of financing, thus giving more business prospects to the company.

Risk Factors

  • As a borrowing arm of the Indian Railways, IRFC derives a large part of their revenues from them. This comes by leasing Rolling Stock Assets to the Indian Railways. In 2019, 99.81% of the total operating revenue came from Lease income, interest on loans and pre-commencement lease interest income. If there is any shift from the funding requirement or reduced demand for Rolling Stock Assets will adversely affect the company’s business.
  • Any slowdown in Indian Railways or government initiatives to move away from traditional railway format will affect IRFC’s business.
  • IRFC meets their funding requirements from taxable/tax-free bonds, term loans from banks, internal accruals and lease financing. Their lending projects can be severely impacted if the cost of funds, coming to them, increases.
  • IRFC could witness a rise in their financing cost if there is a downgrade in their credit ratings. A downgrade in India’s debt rating can also decrease the operational efficiency of the company.

IPO Details in a Nutshell

IPO DateJan 18, 2021 – Jan 20, 2021
Issue TypeBook Built Issue IPO
Face ValueRs 10 per equity share
IPO PriceRs 25 to Rs 26 per equity share
Lot Size575 Shares
Offer for Sale(goes to promoters)594,023,000 Equity Shares
Fresh Issue(goes to the company)1,188,046,000 Equity Shares
Issue Size1,782,069,000 Equity Share
Listing AtNSE, BSE

Conclusion

An NBFC is not a reliable bet in our opinion but IRFC’s business model is very safe. IRFC lends to the Indian Railways, which is a government agency. Thus, the risk of non-repayment of loans is very low, if not zero. As the lending margin increases, net interest income(NII) will increase, and it is more profitable for IRFC. Still, do consider the risk associated with this company as explained above and then come to your own conclusion. IRFC had filed draft papers for its IPO last January. You can find it here. What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section below!