IRFC’S public issue subscribed 65% on Day 1

State-owned Indian Railway Finance Corporation’s (IRFC) ~4,500-crore initial public offering (IPO) garnered 65 per cent subscription on Monday, the first day of the issue.

On Friday, the company responsible for financing the Indian Railways had allotted shares worth ~1,390 crore to anchor investors, which included HDFC, Nippon Life, Invesco, Monetary Authority of Singapore, and Kuwait Investment Authority.

The retail portion of the issue has been subscribed 1.24 times, while the employee quota has already been lapped up by more than 13 times. The high net worth individual and institutional investor book saw only a few bids on the first day. The IPO closes on Wednesday.

IRFC is the first company to launch an IPO this calendar year. Through the issue, the government — which currently holds 100 per cent stake — is divesting shares worth ~1,500 crore. IRFC is issuing fresh shares worth ~3,000 crore.

At the top-end of the price band of ~26, IRFC will have a market capitalisation of nearly ~34,000 crore.

The government’s holding in the company will reduce to 86.4 per cent after the issue.

Market players said the grey market premium for IRFC’S IPO has dropped below 10 per cent amid weakness in the secondary market. Most retail-focused brokerages are advising clients to subscribe to the IPO with a long-term view.

“IRFC has posted strong growth in operating income of 20.7 per cent CAGR between FY18-20, while net profits have grown at a CAGR of 26.3 per cent during the period. The company is unlikely to face any asset quality issues. At the higher end of price band, stock would be trading at P/BV of 1x, fully diluted post issue book value of ~26.6 per share. We expect it to post strong growth along with stable margins due to cost plus model. Given the growth prospects, we recommend a subscribe rating on the issue,” Angel Broking said.