Indian Railway Finance Corp, the market borrowing arm of the Indian Railways, has filed a draft prospectus with the Securities and Exchange Board of India (SEBI) to float an initial public offering.
The IPO comprises a fresh issue of 938 million shares by the company and a secondary market offering of 469 million shares by the government.
The IPO will result in a stake dilution of 13.64%. The company is currently entirely owned by the government.
The exact size of the IPO is not clear, but the government is hoping to raise about Rs 800-1,000 crore from the stake dilution. This could well take the overall IPO size upwards of Rs 2,500 crore, VCCircle estimates show.
The government’s stake sale is part of the disinvestment programme where it intends to monetise assets and plug the fiscal deficit. For the current fiscal year, the government had set a record Rs 1.05 lakh crore target through disinvestment. It has managed to raise only a fifth of the target thus far.
The government has been looking to list some key railways and railways-linked firms. In May 2017, VCCircle had reported about the appointment of merchant bankers for the proposed listings of railway firms, including Ircon Ltd.
IRFC’s IPO plans follows the success of the public float of state-run Indian Railway Catering and Tourism Corp. (IRCTC), which is Indian Railways’ online ticketing service provider. IRCTC’s Rs 645-crore IPO was subscribed nearly 112 times last October.
IRFC didn’t disclose the amount it aims to raise by issuing fresh shares. But it said that it will use the net proceeds from the IPO to augment its capital base and for general corporate purposes.
IDFC Securities, HSBC Securities and Capital Markets (India), ICICI Securities and SBI Capital Markets are the merchant bankers managing IRFC’s IPO.
IRFC is the dedicated market borrowing arm of the Indian Railways. It finances the acquisition of both powered and unpowered vehicles such as locomotives, coaches, wagons, trucks, containers, cranes and other items.
In addition, the company helps in leasing of railway infrastructure assets and national projects of the government. It also offers debt financing to other entities under the Ministry of Railways.
IRFC had financed 82% of the Indian Railways’ total rolling stock for 2018-19, compared with 93% the year before and 72% in 2016-17.
