RVNL dips 7% as government to offload over 5% stake via OFS starting today

Shares of Rail Vikas Nigam Limited (RVNL) dipped 7 per cent to Rs 125.50 on the BSE in Thursday’s intra-day trade after the government decided to divest 5.36 per cent stake in the civil construction company via an offer for sale (OFS).

The government fixed the floor price of Rs 119 per share for the offer, which opens today and closes tomorrow (July 28). The offer is being undertaken by the government to achieve a minimum public shareholding in the company. As on June 30, 2023, the government through President of India held 78.20 per cent stake in RVNL.
 
The proposed OFS comprises a base offer size of up to 70.89 million equity shares of RVNL, representing 3.40 per cent with an option to additionally sell 40.87 million equity shares, representing 1.96 per cent of the total issued and paid-up equity share capital, the company said in a regulatory filing.

At 11:00 AM; RVNL quoted 4 per cent lower at Rs 128.70, as compared to 0.01 per cent rise in the S&P BSE Sensex. The counter had seen huge trading volume with a combined 36.4 million equity shares changing hands on the NSE and BSE.

Meanwhile, in recent months, the stock of state-owned company witnessed a sharp run-up in its market price. Thus far in the financial year 2023-24 (FY24), share price of RNVL has more-than-doubled from Rs 68.60 at the end of March 2023. It had hit a record high of Rs 146.65 on Monday, July 24.

RVNL mostly works on a turnkey basis and undertakes the full cycle of project development from conceptualisation to commissioning including stages of design, preparation of estimates, calling and award of contracts, project and contract management, etc.

RVNL follows an asset-light business model, which helps keep its fixed asset part lower, helping it to keep its balance sheet stress free, and resulting in lower inventory days. RVNL is a project-executing agency working for and on behalf of the Ministry of Railways (MoR) and has a strong order book visibility, which is likely to play a key role in the development of railway infrastructure in India.

On May 30, RVNL in Q4FY23 earnings call said, it has got an order book of Rs 56,000 crore plus, out of which railway share was Rs 36,977 crore, which includes the double line of Rs 6,400 crore, new line of Rs 18,000 crore, metro and others it was around Rs 11,000 crore and from bidding the company have got the order of Rs 20,000 crore.

On July 13, RVNL announced that the company received a letter of award (LOA) from the National Highways Authority of India (NHAI) worth Rs 808 crore.