The government has set the ball rolling to take some more state-owned firms public this year through IPOs, with state-owned Mishra Dhatu Nigam Ltd (Midhani) and railway consultancy firm RITES Ltd filing their draft red herring prospectuses for initial public offerings with the Securities and Exchange Board of India.
Midhani’s public issue comprises a sale of 46.83 million shares by the government. This will result in a 25% stake dilution for the government and make the company compliant with SEBI’s norms for a minimum public float.
VCCircle had, in June last year, reported that the government had hired merchant bankers for various state-owned companies including Midhani and RITES.
RITES, which is also wholly owned by the government, has proposed to sell 24 million shares, or 12% stake, to the public and a small chunk of shares to employees. The offer is entirely a secondary sale by the government.
The government will get three years from the date of listing to bring its stake in RITES to 75% or below.
The share sales are part of the government’s record Rs 72,500 crore disinvestment target for 2017-18 and the forthcoming financial year.
These sales will help the government contain the fiscal deficit, targeted at 3.2% of gross domestic product for 2017-18.
VCCircle had previously reported that the government was the biggest beneficiary from the IPO boom in 2017. The government took four state-run companies public. In all, the government raised about Rs 21,118 crore, besides selling stakes in listed firms.
Here’s a snapshot of the proposed IPO by Midhani:
Issue
Midhani’s public issue comprises sale of 46.83 million shares. The offer is entirely a secondary market sale and will result in 25% stake dilution for the government and make it compliant with SEBI’s norms for a minimum public float. Midhani’s IPO is estimated at Rs 400-450 crore.
Bankers
SBI Capital Markets and IDBI Capital Markets and Securities are merchant bankers managing the IPO.
Lawyers
SNG & Partners and Perkins Coie LLP are Indian and international legal advisers, respectively, to the government on the IPO.
Cyril Amarchand Mangaldas is the legal counsel representing the merchant bankers on the share sale.
Company
Midhani was established in 1973 to help achieve India’s self-reliance in the research, development and supply of critical alloys and products of national security and strategic importance.
The company is in the business of manufacturing special steels and superalloys, besides being the only manufacturer of titanium alloys in India. These products are targeted at niche end users and have special applications in sectors such as defence, aerospace, power generation, nuclear and other general engineering industries.
Midhani claims its products are key ingredients for strategic sectors in India, which typically cannot be imported from other countries due to its national security-related concerns.
The company operates from its manufacturing facility in Hyderabad. It is establishing two new manufacturing facilities in Rohtak and Nellore.
Financials
Midhani reported net profit of Rs 27.30 crore for six months ended September 2017 on revenue (from operations) of Rs 208.06 crore during the same duration.
The company’s revenue stood at Rs 809.70 crore at the end of financial year 2016-17 and Rs 761.44 crore in the year prior.
Its net profit was Rs 126.31 crore in financial year 2016-17 and Rs 119.37 crore in the preceding year, as per its DRHP.
On a restated basis, Midhani’s total revenues grew at a compounded annual rate of 9.77% from financial year 2012-13 to 2016-17. Its profit has grown at a CAGR of 11.23% during the same period.
Here’s a snapshot of the proposed IPO by RITES:
Issue
RITES’ IPO size is estimated at Rs 500-550 crore.
RITES Ltd, which is also wholly owned by the government, has proposed to sell 24 million shares, or 12% stake, to the public besides a small chunk of shares reserved for employees. The offer is entirely a secondary sale by the government.
The government will get three years from the date of listing to bring its stake in RITES to 75% or below.
Bankers
Elara Capital, IDBI Capital Markets, IDFC Bank and SBI Capital Markets are merchant bankers managing the IPO.
Lawyers
DSK Legal and Riker Danzig Scherer Hyland & Perretti LLP are India and international legal representatives, respectively, to the company and government in the IPO.
J. Sagar Associates is the legal adviser to merchant bankers managing the share sale.
Company
RITES was incorporated in 1974 under the Ministry of Railways.
The company is in the business of transport infrastructure consultancy for the railways besides providing consultancy services across other infrastructure and energy market sectors such as urban transport, roads and highways, ports, inland waterways, airports, institutional buildings, ropeways, power procurement and renewable energy.
The firm has been operating for 43 years and has undertaken projects in over 55 countries in Asia, Africa, Latin America, South America and West Asia.
It is the only export arm of Indian Railways for providing rolling stock overseas (other than Thailand, Malaysia and Indonesia).
The company engages in design, engineering and consultancy services in transport infrastructure sector with a focus on railways, urban transport, roads and highways, ports, inland waterways, airports and ropeways.
It also engages in leasing, export, maintenance and rehabilitation of locomotives and rolling stock besides undertaking turnkey projects on an engineering, procurement and construction (EPC) basis for a variety of railway-related projects, both with or without equity participation.
The company is also into wagon manufacturing, renewable energy generation and power procurement for Indian Railways through collaborations by way of joint venture arrangements, subsidiaries or consortium arrangements.
RITES’ caters to a list of clients in various central and state government ministries, departments, instrumentalities as well as local government bodies and public sector undertakings.
Financials
RITES reported a net profit of Rs 142.22 crore for the six months ended September 2017 on revenues (from operations) of Rs 564.40 crore.
Its revenues in financial year 2016-17 and 2015-16 stood at Rs 1,353.80 crore and Rs 1,090.53 crore, respectively.
The company posted net profits of Rs 362.51 and Rs 283.14 crore, respectively, in 2016-17 and 2015-16.
