 "Train, IRFC, Railways")
Shares of Indian Railway Finance Corporation (IRFC) made a weak debut at the bourses on Friday, by listing at Rs 25, a 4 per cent discount from its issue price of Rs 26 per share on the BSE on Friday. On the National Stock Exchange (NSE), the stock opened at Rs 24.90 per share.
At 10:44 am, IRFC was quoting at Rs 25, after hitting a high of Rs 25.50 and a low of Rs 24.30 on the BSE. A combined 214 million equity shares changed hands on the counter on the NSE and BSE.
IRFC is a dedicated financing arm of the Indian Railways for mobilising funds from domestic as well as overseas markets. Its primary objective is to meet the predominant portion of 'extra budgetary resources' requirement of the Indian Railways through market borrowing at the most competitive rates and terms.
The company is a proxy play on the strong capex growth in Railways which has witnessed a considerable pickup post FY15 as the NDA Government accelerated the overall infrastructure spending including Railways. Upon comparing IRFC with other public sector undertaking (PSU) non-banking finance companies (NBFCs) having exposure to infrastructure sectors, we observe that IRFC has a marginally lower return on equity (ROE) which is compensated by higher growth; although valuations appear to be higher than peers, the brokerage firm Nirmal Bang Securities said in IPO note.
IRFC has posted strong growth in operating income of 20.7 per cent compound annual growth rate (CAGR) between FY18-20 while net profits have grown at a CAGR of 26.3 per cent during the same period. Company is unlikely to face any asset quality issues given the fact that the company caters to the Government of India.
“At the higher end of the price band the stock would be trading at P/BV of 1.0x fully diluted post issue book value of Rs 26.6 per share. We expect the company to post strong growth driven by capex by Indian railways along with stable margins due to cost plus model,” Angel Broking said in IPO note.
