IRCON dips 7% as govt begins to offload up to 16% stake via OFS

Shares of IRCON International Ltd, on Wednesday, fell 6.7 per cent to Rs 91.30 on the BSE after the company announced offer for sale (OFS) for up to 16 per cent government stake at a floor price of Rs 88 per share, which opened today for non-retail investors and will open for retail investors tomorrow. The floor price of Rs 88 is at a 10 per cent discount over IRCON's closing price of Rs 97.85 on Tuesday.

The base issue size of the OFS is 10 per cent or over 4.70 crore equity shares, with a green-shoe option to retain over-subscription of 6 per cent or over 2.82 crore shares. The total issue size, including green-shoe option, comes to 16 per cent or over 7.52 crore shares. At the floor price, a 16 per cent stake would fetch over Rs 600 crore to the exchequer.

The government holds 89.18 per cent stake in IRCON, which is under the Railways Ministry and into construction of transportation infrastructure.

At 9:50 AM, the stock was down 5.98 per cent at Rs 92 as compared to 0.66 per cent gain in the benchmark S&P BSE Sensex. Around 54.7 lakh shares have changed hands on the NSE and BSE combined, so far.

During Q3FY21, IRCON's revenue from operations increased 29 per cent sequentially to Rs 1,244 crore, while profit after tax stood at Rs 103 crore, up 35 per cent. As of December 31st 2020, the company's total order book stood at Rs 32,814 crore.

Regarding the impact of Covid-19 on the company's operations, the company said, "Construction activities have been started in full swing and as such there is no shortage of labour or supply chain interruption. We have surpassed the construction activities in Q3FY21 as compared to last year."

In a post-results note, IDBI Capital said that although the company's headline numbers were below the brokerage's estimate, the execution of projects has started to pick up.

"With Covid pandemic stabilizing, execution of projects has started to pick up. For FY22E, IRCON guides for revenue of Rs 7,000 rore and Rs 10,000 crore for FY23E. Q3FY21 Order book at Rs 32,800 crore equals to 7xTTM revenue and YTDFY21. Maintain 'BUY' rating with an unchanged EPS and TP of Rs 110 (valuing the stock at 8.5x FY23E EPS, equal to its avg. since IPO)," it said.