Ircon stake sale on course; govt plans to raise around Rs 6 billion

After the massive response from investors for the initial public offering (IPO) of RITES, the government is set to divest around 10.5 per cent stake in another Railways subsidiary, Ircon International, in September.  

The government is targeting to raise around Rs 6 billion through the listing of Ircon. On the other hand, the divestment of the government's stake in the other two Railways subsidiaries -- Rail Vikas Nigam Limited (RVNL) and Indian Railway Finance Corporation (IRFC) -- might happen during the October to December quarter of the current financial year. 

This is part of the Department of Investment and Public Asset Management's (Dipam's) larger roadmap to garner disinvestment proceeds to the tune of Rs 800 billion as per the Budget estimates. As on July 5, the government has realised Rs 92.19 billion out of this target. Though Ircon came out with its draft red herring prospectus (DRHP) on March 28, sources revealed that the idea behind going for a September date might be about waiting for the closure of March accounts. During the financial year 2017-18, total disinvestment proceeds stood at Rs 1 trillion, surpassing the revised estimates. 

In Railways public sector undertakings, the audit normally happens during August and the annual general meeting in September. Ircon might have to speed up this procedure and wind up its AGM by August to go for its listing in September. Moreover, it has to get the clearance from the board of directors in the upcoming board meeting.

The company stated in its DRHP that it attracts the majority of projects from the railway sector, which accounts for 84.99 per cent of its order book as of December 31, 2017. Its order book was seen at Rs 223,871.7 million. According to reports, RITES received bids for 1.68 billion shares, which was 66.85 times the demand of the 25.2 million shares on offer for its listing held last month.

In the month of June, Railways Minister Piyush Goyal had said that the listing of Indian Railway Catering and Tourism Corporation (IRCTC) and IRFC had been put on hold. "I have delayed IRCTC listing because of valuation issues. The value of the database available with IRCTC has not been captured. Similarly, regarding IRFC, the listing is stuck because of a tax issue and we are trying to solve it with the ministry of corporate affairs," the minister had said.

The IRFC dispute with the Corporate Affairs Ministry is regarding an accumulated deferred tax liability of Rs 63.92 billion. IRFC faced a deferred tax liability as its depreciation was greater than profit. The company did not pay tax under normal assessment and was subject to a minimum alternate tax (MAT) of 21 per cent. Besides, it had to make a provision for the deferred tax liability at 35 per cent. Thus, the company's books were bearing a total tax provision of 56 per cent.  

Key details  

• Rs 800 billion Targeted disinvestment proceeds for 2018-19 
• Rs 92.19 billion Amount raised so far 
• Rs 1 trillion Disinvestment proceeds in 2017-18 
• Ircon, IRFC, RVNL: Railway subsidiaries that might be listed this year