For a country as vast and dense as India, every sector, right from agriculture to telecom has multiple players and heavy competition in their respective fields, which makes this story for today even more exciting.
With few segments having a spectacular one sided monopoly, comes India’s very own Indian Railway Catering and Tourism Corporation (IRCTC). The state-owned entity operates in four business segments, internet ticketing, catering, packaged drinking water, under the Rail Neer brand, and travel and tourism.
With an intention to dilute 12.6% of its stake, the government has unleashed a series of IPOs to mop up about Rs 1,500 crore to begin with in the current fiscal, as a part of its divestment drive.
The wave of shock that’s run here is that just on its 1st day of drive, IRCTC’s IPO received bids for 1.64 crore equity shares against the offer size of 2.016 crore shares. The second day saw no relief either. This IRCTC IPO received bids for 65,495,400 shares against the total issue size of 20,160,000.
IRCTC IPO Subscribed to 60% Just on Day 1; 100% On Day 2
The Rs 645-crore public offer of the Indian Railway Catering and Tourism Corporation (IRCTC) had been subscribed 81% just a few hours after the IPO opened on September 30.
The divestment issue, that started from Sept 30, 2019 will close on October 03, 2019, following which the government’s stake in IRCTC will come down by 12.5 but more on that later.
With a gawking result on Day 1, we thought this would set a benchmark. Oh, how we were wronged! Because day 2, 01 Oct, brought even more subscriptions along with it. In fact, IRCTC’s IPO was subscribed 3.25 times on the 2nd day!
At 5:00 PM, the IRCTC IPO received bids for 65,495,400 shares against the total issue size of 20,160,000. On the 1st day, retail investors subscribed 2.2 times and employees’ portion was also fully subscribed, while non-institutional investors’ category saw a subscription of 21%.
However, on the 2nd day, the retail investors have bid for 43,370,920 shares which is 6.2 times the allocated offered shares.
In fact, the Qualified Institutional Buyers subscribed 1.65 times, while the non-institutional investors have subscribed 1.73 times. As many as 1,60,000 shares are reserved for employees, who along with retail investors, will get shares at a 10% discount to final offer price.
Most brokerages have recommended ‘subscribe’ recommendation on the IRCTC IPO, given its reasonable valuation and monopoly in the Indian Railways.
The IPO is part of the government’s divestment programme, the price band for which has been fixed at Rs 315-320 per share.
A Brief History of the Very Unusual
To bridge the high fiscal deficit gap, the government prepared a list of 43 public sector units (PSUs), stepping up their disinvestment drive. Starting with the Indian Rialways, the government hit the primary market with an IPO, worth Rs 645-crore public offer for IRCTC on Monday, lasting upto October 03, 2019.
The 12.5% divestment of IRCTC is expected to elicit a good response as it has a unique business model, and, more importantly, the company does not have any competition across any business segment.
- This disinvestment drive will bring the government’s stake in IRCTC down by 12.5%, post which, the government’s share in IRCTC will be 87.5%, compared to 100% stake at present.
- The lead managers for the IRCTC IPO are SBI Capital Markets Limited, IDBI Capital Markets & Securities Limited and Yes Securities (India) Limited.
- In total, the Centre aims to raise around Rs 90,000 crore by way of disinvestment of Central Public Sector Enterprises in FY20, up from Rs 85,000 crore in FY19.
- Of the total shares on offer, 50% is allocated for QIBs, 15% to the non-institutional investor category and 35% to the retail category.
Comments are closed, but trackbacks and pingbacks are open.