IRFC’s Rs 4,633-crore IPO to open on Monday; here are key details

NEW DELHI: Indian Railway Finance Corporation (IRFC) on Wednesday said it will launch its Rs 4,633-crore IPO on Monday, January 18.

The issue will comprise 1,782,069,000 shares. A price band of Rs 25-26 per share has been fixed for the IPO. At the upper end of the price band, the size of the issue will be Rs 1,633.37 crore. While qualified institutional bidders (QIBs) will have a quota limit of 50 per cent of the shares on offer, 35 per cent of the issue will be reserved for retail investors, and 15 per cent for individual investors.

The IPO will include a fresh issue of up to 1,188,046,000 shares, aggregating up to Rs 3,088.91 crore. It will also comprise an offer for sale (OFS) of 594,023,000 shares by the government, amounting to Rs 1,544.44 crore.

The issue will close for subscription on January 20.

IRFC is the dedicated market borrowing arm of the Indian Railways. Its primary business is financing the acquisition of rolling stock assets, leasing of railway infrastructure assets and national projects of the government, and lending to other entities under the Ministry of Railways (MoR).

The MoR is responsible for the procurement of rolling stock assets and for the improvement, expansion and maintenance of project assets, and IRFC is responsible for raising the finance necessary for such activities.

In FY20 , the company financed Rs 71,392 crore, accounting for 48.22 per cent of the actual capital expenditure of the Indian Railways.

The company follows a financial leasing model for financing the rolling stock assets. 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, unless otherwise revised by mutual consent.

In terms of the leasing arrangements, the principal amount pertaining to the leased assets is effectively payable during the primary 15-year lease period, along with the weighted average cost of incremental borrowing and a margin determined by the railway ministry in consultation with us at the end of each fiscal year.

As of September 30, 2020, the company’s total AUM consisted of 55.34 per cent of lease receivables primarily in relation to rolling stock assets, 2.25 per cent of loans to central public sector enterprises entities under the administrative control of the Ministry of Railways, and 42.41 per cent of advances against leasing of project assets.

As far as the company’s financials are concerned, the company’s total revenue rose 22.15 per cent to Rs 13,421 crore in FY20 from Rs 10,987 crore in FY19. Sales were up 19.33 per cent in FY19, and stood at Rs 7,384 in the
six months ended September 30.

Profit for the six months ended September 30 stood at Rs 1,886.84 crore. It stood at Rs 3192 crore crore in FY20, Rs 2,140 crore in FY19 and Rs 2,001 crore in FY18.

The company’s capital adequacy ratio as of March 31, 2020 and September 30, 2020 was 395.39 per cent and 433.92 per cent, respectively. As of September 30, 2020, the company did not have any non-performing asset.

The net proceeds of the IPO are proposed to be utilised towards augmenting the company’s equity capital base to meet future capital requirements arising out of growth in business and general corporate purposes.

DAM Capital Market Advisors (formerly known as IDFC Securities), HSBC Securities and Capital Markets, ICICI Securities and SBI Capital Markets are managing the offer.