Indian Railway Finance Corporation Made its Stock Market Debut at Discounted Issue Price
On Friday, IRFC made its stock market debut at 4% discount to the issue price. The shares of the company got listed at Rs 24.90 on NSE, a discount of 4.23 per cent to its issue price of Rs 26. The script debuted at Rs 25 on BSE, down 3.85 per cent.
IRFC is wholly-owned by the Government acting through the Ministry of Railways. Its primary business is financing the acquisition of rolling stock assets and project assets of the Indian Railways and lending to other entities under the ministry.
This is the first stock listing of 2021 wherein the government plans to sell around 13.64% in the company to raise around INR 4,633.38 crore at the upper end of the price band.
“The company has supreme asset quality with nil non-performing asset (NPA) since its inception along with robust net profit growth of 30% CAGR in PAT for the past three years. It has recently granted a zero tax under income tax act due to its unrecognized depreciation. The company’s management clarified that nil tax will remain for certain financial years," said Canara Bank Securities Ltd ahead of the issue. It added that as of 31 March 2020, the company trades at 1.02 times price to book (P/B) for FY20 earnings.
According to Nirmal Bang Securities, IRFC is a proxy play on the strong capex growth in Railways which has witnessed a considerable pickup post FY15 as the NDA government accelerated the overall infrastructure spending including railways.
“Upon comparing IRFC with other PSU non-banking financial companies (NBFCs) having exposure to infrastructure sectors, we observe that IRFC has a marginally lower return on equity (ROE) which is compensated by higher growth; although valuations appear to be higher than peers," Nirmal Bang Securities said.