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Macrotech Developers to Launch 16 Projects Worth ₹10,300Cr – Top Indian Market Updates

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

Macrotech Developers to launch 16 projects worth ₹10,300 crore in H2 FY23

Realty firm Macrotech Developers Ltd (Lodha) plans to launch 16 new projects in the second half (H2) of FY23 with an estimated sales potential of ₹10,300 crore as it seeks to tap rising housing demand. These projects would be a mix of fully-owned and joint development with landowners. The company has delivered more than 89 million square feet of real estate and is developing around 100 million sq. ft. under its ongoing and planned portfolio.

Read more here.

MRF Q2 Results: Net profit falls 32% YoY to ₹130 crore

MRF Ltd reported a 32% year-on-year (YoY) decline in consolidated net profit to ₹130 crore for the quarter ended Sept (Q2 FY23). Its revenue from operations rose 18.7% YoY to ₹5,826 crore during the same period. The tyre manufacturer’s total expenses stood at ₹5,730 crore, up 21% YoY. MRF’s board has declared an interim dividend of ₹3 per share.

Read more here.

Arvind Q2 Results: Net profit rises 79% YoY to ₹125 crore

Textile manufacturer Arvind Ltd reported a 79% YoY increase in consolidated net profit to ₹125.02 crore for the quarter ended Sept (Q2 FY23). Its revenue from operations rose 2.9% YoY to ₹2,169.81 crore during the same period. The company’s total expenses stood at ₹2,072.45 crore in Q2, up 3.5% YoY. Revenue from its textiles segment rose 1.8% YoY to ₹1,758.98 crore.

Read more here.

Godrej Properties acquires 12-acre land parcel in Pune

Godrej Properties Ltd has acquired a 12-acre land parcel in the Mundhwa locality of Pune. The company is planning to develop a premium group housing project in this land parcel. The project will have a developable potential of around 2.2 million sq. ft. with an estimated revenue potential of around ₹2,000 crore based on the current business assumptions.

Read more here.

Bajaj Electricals Q2 Results: Net profit flat at ₹62 crore

Bajaj Electricals Ltd reported a net profit of ₹62 crore for the quarter ended Sept (Q2 FY23). It posted a net profit of ₹62.55 crore in Q2 FY22. Its revenue from operations fell 6.41% YoY to ₹1,201.14 crore in Q2 FY23. The company’s revenue from the consumer products segment fell 2.45% YoY to ₹882.87 crore. Total expenses stood at ₹1,159.22 crore in Q2, down 6.81% YoY.

Read more here.

Aurobindo Pharma units recall products in US market for manufacturing issues

Aurobindo Pharma Ltd’s units are recalling different products in the US market for manufacturing lapses. According to the latest Enforcement Report by the US Food & Drug Administration (USFDA), New Jersey-based Aurobindo Pharma USA, Inc. is recalling 9,504 bottles of Quinapril and Hydrochlorothiazide tablets. The tablets (used to treat high blood pressure) were manufactured in India.

Read more here.

Bosch Q2 Results: Net profit flat at ₹372 crore

Bosch Limited reported a net profit of ₹372.4 crore for the quarter ended Sept (Q2 FY23). It posted a net profit of ₹372 crore in Q2 FY22. The auto component manufacturer’s revenue from operations rose 25.5% YoY to ₹3,662 crore in Q2 FY23. Total expenses stood at ₹3,324.2 crore, up 25.7% YoY.

Read more here.

Two IPOs to hit the markets tomorrow

Five Star Business Finance Ltd’s IPO is set to open for subscription tomorrow. The company provides secured business loans to micro-entrepreneurs and self-employed individuals. The IPO only consists of an offer for sale (OFS) aggregating to ₹1,960 crore. The company has fixed ₹319-336 as the price band of the IPO.

Archean Chemical Industries Ltd is also launching its IPO tomorrow. The company is a leading speciality marine chemical manufacturer in India. The IPO consists of a fresh issue of equity shares aggregating to ₹805 crore and an OFS aggregating to ₹657.31 crore. The company has fixed ₹386-407 as the price band of the IPO.

Jubilant FoodWorks Q2 Results: Net profit rises 9.8% YoY to ₹131.5 crore

Jubilant FoodWorks Ltd reported a 9.8% YoY increase in consolidated net profit to ₹131.5 crore for the quarter ended Sept (Q2 FY23). Its revenue from operations rose 16.6% YoY to ₹1,301.48 crore during the same period. Total expenses stood at ₹1,153.92 crore, up 19.76% YoY. The company opened 76 new Domino’s stores in Q2, taking the total number to 1,701.

Read more here.

Godrej Consumer Q2 Results: Net profit falls 25% YoY to ₹359 crore

Godrej Consumer Products Ltd (GCPL) reported a 25% YoY decline in consolidated net profit to ₹358.86 crore for the quarter ended Sept (Q2 FY23). Its revenue from operations rose 7% YoY to ₹3,364.45 crore during the same period. GCPL’s total expenses rose 14.41%Y YoY to ₹2,951.38 crore in Q2. Revenue from the Indian market stood at ₹1,985.03 crore, up 8% YoY.

Read more here.

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Editorial

Rolex Rings IPO: All You Need To Know

rolex rings ipo

It’s raining IPOs once more! Rolex Rings Limited has decided to get listed. Its IPO begins today on July 28 and ends on July 30. Rolex Rings makes bearing rings and automotive components that are used in all sorts of vehicles as well as other industrial processes. The company has big names like Ford and General Motors on its client roster. 

 A bearing ring comes in all shapes and sizes. It is used in cranes, axles of vehicles, and even at a baggage belt at the airport. India’s bearing market is worth Rs 12,000 crore, with close to 60% of total demand being met domestically and 40% through imports.

Bearing Rings Used In Various Industrial Processes

Can a company specialized in making something as common as a bearing ring make it up in the capital markets? In this piece, we explore what the company does, and what it has to give to its investors. 

IPO Details

What Does Rolex Rings Do?

A family-run firm started in 1975, Rolex Rings Limited is in the business of making hot rolled forged and machined bearing rings, and automotive components. These are used in two-wheelers, passenger vehicles, commercial vehicles, off-highway vehicles, electric vehicles (EVs), industrial machinery, wind turbines and railways, amongst other segments.

It is one of the top five forging companies in India, the largest being Bharat Forge. Forging and Machining are processes used to shape metals or strengthen them according to industrial needs. Rolex Rings makes forged components for use in the automotive industry and other industrial applications. 

Rolex Rings is based in Rajkot, Gujarat. The company has three manufacturing facilities based in Rajkot itself, with an annual achievable capacity of 144,750 million tons per annum (MTPA) in forging and 6.9 crore parts per annum in machining.

Bearing Rings contribute nearly ~53% and Automotive Components nearly ~37% to the total revenue of the company. In 2021, the top 10 customers contributed nearly 72.6% to the total revenue.

Exports accounted for nearly ~56% of the total revenue. Globally, Rolex Rings caters to nearly 60 clients across 17 countries like the USA, France, Germany, Italy, Thailand. 

How Strong Is Rolex Rings’ Financial Position?

Financial Performance Of Rolex Rings (All Amount In Indian Rupees Crore)

Between 2019 and 2021:

  • Total Assets Increased by ~2%
  • Total Revenue Decreased by ~32%
  • Profit After Tax Increased by ~47%
  • Total Debt fell by ~35% from Rs 385 crore in 2019  to Rs 250 crore in 2021

A close look at the other listed forging companies reveals that Bharat Forge is the largest competitor in terms of revenue. However, Rolex tops the list when it comes to Return on Net Worth it offers. Its Price To Earnings ratio, based on the issue price is anywhere between 23-28x, which is moderate compared to industry peers. 

Risks

  • The company has had issues paying back its lenders in the past. It defaulted on loan payments in 2013 and entered corporate debt restructuring (CDR) with public sector banks. The company has also delayed repaying working capital and interest in the past. 
  • Top 10 customers contribute nearly ~73 percent to total revenue. Such a concentration in the client base is a risk in case the company has a fallout with some. 
  • Close to ~56% of the revenue comes from abroad. In case of fierce competition or adverse conditions, the company’s balance sheet can be impacted.
  • The promoters of the company have pledged their shares to take other loans. In case they fail to pay these loans, the shares can be transferred to someone else. This can have an adverse impact on the financial and operational condition of the company.  

What Next?

The company has said that it is going to use Rs 45 crores raised from the IPO for funding long-term working capital requirements and the rest of it for general corporate purposes. 

The company has moderately good finances, neither too bad, nor too impressive. The company’s debt history seems a little dicey. Yet, the company has its presence in the international market as well. If the economy recovers faster from the economic impact of the second wave of COVID-19 and the third wave is evitable, the company can benefit from an increase in automobile sales and industries reopening. 

The GMP or Grey Market Premium of Rolex ring is anywhere between Rs 450 to Rs 500. This means that the shares traded at Rs 500 more than the expected listing price. It seems that the company has received some good interest in the Grey Market. 

Are you going to apply for the IPO? Do you think the company can give some really good returns? You can let us know in the comment section available in the marketfeed app available exclusively for Android and iOS. 

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Editorial

Rakesh Jhunjhunwala-backed Nazara Technologies Comes Up With IPO

nazara tech ipo

Nazara Technologies, a Mumbai-based gaming, and e-sports company has come up with its IPO starting 17th March 2020. Nazara’s products comprise Subscription, Freemium, eSports, Skill-Based Games. It has expanded its operations in Africa, North America, and the Middle East as well.

The company is backed by High Net Investors like IIFL, Rakesh Jhunjhunwala, Westbridge Capital, and a few more. The company doesn’t have any ‘listed’ competitors and will be the first of its kind to debut in the Indian Stock Market. In this piece, we explore what Nazara Technologies’ role is in the IPO Bull run. 

IPO Review

IPO Opening DateMar 17, 2021
IPO Closing DateMar 19, 2021
Issue TypeBook Built Issue IPO
Face ValueRs 4 per equity share
IPO PriceRs 1100 to Rs 1101 per equity share
Min Order Quantity13 Shares
Listing AtBSE, NSE
Issue Size5,294,392 Eq Shares / upto Rs 582.91 crore
Offer for Sale5,294,392 Eq Shares / upto Rs 582.91 crore

Business Model

  • The Indian gaming industry works differently from abroad. PC gaming was fairly successful in India, yet there was a low-penetration of high-end ‘personal computers’ due to the high costs involved. Subsequently, ‘box gaming systems like the PlayStation and Xbox didn’t have much success. India directly transitioned to mobile gaming. Mobile phones were inexpensive, the internet was cheap, and had a good penetration rate. PUBG mobile is a perfect example of how these factors were monetized. 
  • Since the company operates in the virtual space, it has an asset-light business model. It has tie-ups with various telecom operators, including but not limited to Airtel, Vodafone, and Idea in India and Etisalat and Ooredo in the Middle East for gaining subscription-based users. Apart from this, the company has tied-up with over 113 telecom operators in 61 countries. It offers a catalog of over 1,000 android games on its subscription service through different content aggregators across the globe. 
  • The company essentially deals in the online gaming space and e-sports. The company generates cash flows from the following elements:
    • Freemium – Game can be downloaded for free but the user may have to watch ads or pay for full access  
    • Gamified Early Learning– approaching early level education by using video 
    • game design and game elements in learning environments.
    • Esports – Competitive online multiplayer gaming.
    • Subscription –One-time payment of a monthly or annual fee to gain unlimited access for the duration  
    • Apart from this, the company gains cash flows from advertisements and paid/premium use games.
  • The company has newly entered the ‘gamified early learning’ segment. The segment targets kids between ages 2-6 years of age. The subscription for this segment increased during the COVID-19 pandemic. This was since remote accessibility of educational content became a necessity during the pandemic. From contributing 7% to total revenue in March 2020, this segment now contributes ~39%, the highest of all segments.
  • The company also works on competitive online multiplayer gaming or esports. The company’s subsidiary Nodwin Gaming specializes in it. Nodwin Gaming partners with other brands to create multiple gaming events and intellectual properties in India, such as Mountain Dew Arena, Indian Gaming Show, and Asus ROG Masters. It has partnered with ESL, the biggest esports organizer in the world. It handles gamers, events, broadcasting, prizes, and other aspects of the segment. 
  • The company faces competition from companies like Sony Interactive Entertainment, Reliance Jio, Tencent, and Microsoft Game Studios to emerging gaming start-ups such as Dream11, Mobile Premier League (MPL), Games 24×7 

Financials

.30-Sep-2031-Mar-2031-Mar-1931-Mar-18
Total Assets7,986.557,768.295,145.834,707.59
Total Revenue2,070.062,621.461,860.981,819.40
Profit After Tax(101.07)(266.15)67.1310.23
  • The company was profitable in the past. However, in the past year, the company has made many acquisitions in the gaming industry in order to expand its domain in the field. In FY20, the company acquired Paper Boat Apps Pvt Ltd, AbsoluteSports Pvt Ltd, CrimzonCode Technologies Pvt Ltd, Halaplay Technologies Pvt Ltd. These acquisitions have eaten into the profit books.
  • The company’s assets and revenue have grown constantly. Its revenue has grown ~69.8% in the past 2 years.
  • Nazara has borrowings worth Rs 1.64 crore. The company operates on a low level of debt. 
  • India and North America businesses contribute an equal proportion of ~41% each to the revenue stream. The remaining 18% is contributed by Asia Pacific and Middle East countries.

After the COVID-19 pandemic, the consumption of online content increased. Nazara did eventually benefit from it. It is going to be the first listed company in the online gaming segment. It has a grey market premium of 77% as of 16th March, 2020. The company was in profits 3 years ago, but has been recording constant losses for the past 2 years because of its high number of acquisitions.

Krafton, the company behind PUBG Mobile has acquired 15% stake in Nodwin Gaming, a subsidiary of Nazara. There might be a possibility of Nodwin Gaming playing a part in PUBG Mobile’s operations after its relaunch in India. The company’s long term prospects on profitability and operations are a little tricky, but the company can definitely make a good one for listing gains. 

You can check out the Red Herring Prospectus for fine details on Nazara Technologies IPO over here.

Categories
Editorial

Craftsman Automation IPO: All You Need to Know

Craftsman Automation has launched its three-day initial public offering (IPO) today- March 15, 2021. This is the first IPO to be launched by an auto components manufacturer in the past 3 years. Let us take a closer look into the company and its IPO.

Company Profile – Craftsman Automation

Craftsman Automation Limited is an engineering company based in Coimbatore. It was incorporated in 1986 and is primarily engaged in the design, development, and manufacturing of automotive components. The company is well-known for the machining of cylinder blocks and cylinder heads in commercial vehicles and tractors. A cylinder block is the basic framework of a vehicle’s engine that plays an important role in maintaining stability and controlling temperature. The company offers a wide range of such components to automobile manufacturers in India and abroad. 

The company’s products and services segments are divided into three verticals:

  1. Automotive- Powertrain and others: This includes engine parts such as cylinder heads, cylinder blocks, transmission parts, turbocharges, etc. These components are used in the production of commercial vehicles, special utility vehicles, and tractors. This segment contributes nearly 17.3% to the overall revenue of the company.
  2. Automotive- Aluminium products: This segment includes key products such as cylinder blocks, as well as crankcases for two-wheelers, passenger vehicles, and commercial vehicles. This division contributes 47.5% to the company’s overall revenue.
  3. Industrial and Engineering: The main products in this segment include high-end precision products (castings) and storage solutions. It caters to the pharma, fast-moving consumer goods (FMCG), and e-commerce industry. This segment contributes 35.2% to the total revenue. 

Craftsman Automation owns and operates 12 state-of-the-art manufacturing facilities across 7 cities in India. These units are strategically located near major automobile manufacturing hubs. The company has established itself as a leading provider of essential components to large automakers. Some of their prominent clients include Mahindra & Mahindra, Tata Motors, Escorts, Ashok Leyland, Daimler India, JCB India, and TVS Motors. 90% of their revenue comes from the domestic market and the remaining 10% from exports.

About the IPO

In February 2021, Craftsman Automation received approval from SEBI to float an initial public offering (IPO). The public issue will open on March 15, 2021, and close on March 17, 2021. The total issue size of the IPO is Rs 823.70 crore. This comprises a fresh issue of equity shares aggregating up to Rs 150 crore. It also includes an offer for sale (OFS) of 45.21 lakh equity shares (aggregating up to Rs 673.70 crore) by promoters and existing shareholders. The price band for the IPO has been fixed at Rs 1,488-1,490 per share.

Individual investors can bid for a minimum of 10 equity shares (1 lot), which will amount to Rs 14,900. The maximum number of shares that can be applied by a retail investor is 130 equity shares (or 13 lots). Thus, the maximum amount one can invest in the IPO is Rs 1,93,700. But take care not to apply for more than 1 lot, as your capital may get blocked for no reason if the IPO is oversubscribed.

Craftsman Automation will utilise the net proceeds from the IPO for two main purposes. The main priority is to make repayment or pre-payment of its existing debts. As per reports, around 80% of the IPO proceeds will be used for repaying debts. The remaining amount will be used for general corporate purposes. The company’s promoters, lead by Srinivasan Ravi, currently hold a 63.4% stake. The total promoter holding in Craftsman Automation will reduce to 59.76% post the successful completion of the IPO.

Financial Overview

.31 Dec 2020(FY 21)31 March 2020 (FY20)31 March 2019 (FY19)31 March 2018 (FY18)
Total Assets2,246.292,303.132,325.391,999.4
Total Income1,029.91,501.051,831.61,522.86
Profit After Tax50.641.0797.3631.5
(Values in Rs crore)

From the table, it is clear that Craftsman Automation’s financial performance has not been consistent over the years. The company’s revenue grew at a CAGR of ~20% between 2017 and 2019. After this period, it faced a decline in both domestic and international demand across all three product verticals (due to a slowdown in the automobile industry). The Industrial & Engineering division is the only segment that has shown positive growth in the last three years. The fall in revenue was also due to the high capital expenditure it incurred for setting up production plants. On the other hand, it shows how they have focused on scaling up production activities.

The company’s profit has shown a strong rebound at Rs 50.6 crore for the 9 months ended December 2020, despite a heavy fall in revenue. This was primarily because their interest costs (for loans) had fallen due to the moratorium introduced by the government amidst the Covid-19 pandemic. 

Another factor to consider is the overall debt burden of the company. Between 2016 and 2020, Craftsman Automation’s long-term debt has grown at a CAGR of around 20%. This is quite alarming indeed. Its total debt as of December 31, 2021, stood at Rs 890.11 crore. As mentioned before, the company will use a major part of its IPO proceeds to reduce this debt. 

Graph showing the company’s long-term debt figures from 2017-2020 (Values in Rs crore)

Risk Factors

  • There has been a significant decline in automobile sales due to the ongoing Covid-19 pandemic. The company is uncertain whether its sales will recover even after the impact of the Covid-19 pandemic is over.
  • Craftsman Automation has not been able to meet debt obligations through its debt financing arrangements. Also, some of the company’s assets have been mortgaged as securities with lenders. In case they are unable to pay off debts, it may adversely affect their business operations, financial results, and cash flows.
  • As mentioned before, the company has prominent clients from the automobile industry. There could be instances wherein the firm loses key customers, which could lead to a decline in production and sales. This could affect its overall business operations and financial results.
  • The company operates in a highly competitive business environment. Its market share and profits could decline if they are unable to respond to competition and pricing pressures. This could ultimately affect their operations and financial results. [Craftsman Automations’ peers in the auto-components industry include Bharat Forge, Endurance Technologies, Mahindra CIE Automotive, and Sundaram Fasteners]  
  • Craftsman Automation is also involved in certain legal proceedings amounting to Rs 21.24 crore.
  • The company does not have long-term contracts or exclusive arrangements with its suppliers. Its operations could be severely affected by supply chain disruptions, which has been a major issue for many firms amidst the Covid-19 pandemic.

IPO Details in a Nutshell

IPO DateMarch 15, 2021 – March 17, 2021
Issue TypeBook Built Issue IPO
Face ValueRs 5 per equity share
IPO PriceRs 1,488 to Rs 1,490 per equity share
Lot Size10 shares
Issue SizeRs 823.70 crore
Fresh Issue (goes to the company)10,06,711 equity shares of Rs 5 each (aggregating up to Rs 150 crore)
Offer for Sale (goes to promoters)45,21,450 equity shares of Rs 5 each (aggregating up to Rs 673.70 crore)
Allotment DateMarch 22, 2021
Listing DateMarch 25, 2021
Listing AtBSE, NSE

Axis Capital and IIFL Securities have been appointed as the book-running lead managers to the public issue. Craftsman Automation had filed draft papers for its IPO in December 2020. You can read it here.

Conclusion

Craftsman Automation had filed draft papers for an IPO with SEBI way back in June 2018. It had even received the regulator’s approval for the same. However, the company could not launch the public issue as market conditions were not favourable during that period. Now, the question arises whether investors would show interest in this company amidst a slowdown in the automobile sector. Moreover, there are red flags such as declining revenues and large debts. Do consider the risks associated with this company and come to your own conclusion.

Ahead of the IPO, the company was able to raise Rs 247.11 crore from 21 anchor investors. HSBC Global Investment Funds, Tata Mutual Fund (MF), Aditya Birla Sunlife MF, The Nomura Trust are some of the prominent anchor investors of the firm. 

In the current scenario, almost every IPO is providing some lucky investors with great listing gains. Before applying for Craftsman Automation’s IPO, I will personally wait to see if the portion reserved for institutional investors gets oversubscribed. 

What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section.

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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!