Railway financing arm IRFC files for IPO

Indian Railway Finance Corporation (IRFC), a 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 (IPO).

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 per cent. 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 to Rs 2,500 crore.

The government’s stake sale is part of the disinvestment programme, where it intends to monetise assets and plugs 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 so far.

The government has been looking to list some key railways and railways-linked firms. IRFC’s IPO plans follows the success of the public float of the state-run Indian Railway Catering and Tourism Corporation (IRCTC), which is Indian Railways’ online ticketing service provider. IRCTC’s Rs 645 crore IPO was subscribed nearly 112 times in the last October.

IRFC, however, did not 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, Capital Markets (India), ICICI Securities and SBI Capital Markets are the merchant bankers managing IRFC’s IPO.

IRFC 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 per cent of the Indian Railways’ total rolling stock for 2018-19, compared with 93 per cent in the previous year and 72 per cent in 2016-17.