Rail Vikas Nigam is a State-owned miniratna company that is set to launch its initial public offering for subscription. It is as an extended arm of the Ministry of Railways working for & on behalf of MoR. It is empowered to act as an Umbrella SPV to undertake project development, resource mobilization etc. directly or by creating project specific SPVs or by any other financing structure found suitable.
Issue Details of RVNL IPO:
| IPO Opens on | 29th Mar 2019 |
| IPO Closes on | 3rd April 2019 |
| Issue Price band | Rs 17 – Rs 19 |
| Any Discount | Rs 0.50p discount to retail investors |
| Issue Size | Rs 430 crore |
| Minimum Investment | 780 shares (Rs 14820) |
| Registrar | Alankit |
| Book Running Lead Managers | Elara Capital & Yes Securities |
| Listing | BSE/NSE |
| Download | Rail Vikas Nigam Limited Red Herring Prospectus |
RVNL IPO Grey market Premium :
- 30 March 2019 – GMP Rs XX per equity share
IPO Issue Allocation:
- Qualified institutional buyers (QIBs) – 50% of the offer.
- Non-institutional bidders – 15% of the offer.
- Retail individual bidders – 35% of the offer.
Background:
Rail Vikas Nigam (RVNL) is a wholly-owned government company, was incorporated with the objective to undertake rail project development, mobilisation of financial resources and implementation of rail projects pertaining to strengthening of golden quadrilateral and port connectivity and raising of extra-budgetary resources for project execution.
RVNL is in the business of executing all types of railway projects including new lines, doubling, gauge conversion, railway electrification, metro projects, workshops, major bridges, construction of cable stayed bridges, institution buildings etc.
Top Shareholdings:
Promoter the Ministry of Railways currently hold 100 percent of the pre-offer paid-up equity share capital of the company. After this offer, promoter will hold 87.84 percent of the post-Offer paid-up equity.
Objective of the issue: The company will not receive any proceeds from the offer and all proceeds will go to the selling shareholder, the government of India.
Anchor Investors:
Financials:
RVNL’s revenue from operations has increased at a CAGR of 29% from Rs 4,539 crore in 2016 to Rs 7,597 crore in 2018,
Net profit has increased at a CAGR of 15.20 % from Rs 429.43 crore in FY16 to Rs 569.92 crore in FY18.
| FY15 | FY16 | FY17 | FY18 | 30/9/18 | |
| Revenue | 327 | 4720 | 6163 | 7822 | 3770 |
| Net Profit | 376 | 498 | 543 | 664 | 310 |
RVNL has an order book of Rs 77,504.28 crore as on December 31, 2018 which includes 102 ongoing projects. The management says ~ Rs 30,000 crore worth orders are long gestation projects with execution timeline at five to seven years. Orders of ~ Rs 45,000 crore are related to doubling, new lines, etc, where execution timelines are two to three years. These provide near-medium term revenue visibility for RVNL
During the financial year ending March 31, 2018, RVNL has completed a total of 885.50 rkm of project length which included 315.20 rkm of doubling and 425 rkm of railway electrification.
Since its inception in 2003, Ministry of Railways has transferred 179 projects to RVNL of which 174 projects are sanctioned for execution. Out of these, 72 projects have been fully completed totalling to Rs 20,567.28 crore and the balance are ongoing.
Valuation as compared to its peers:
At the IPO price band of Rs 17-19, the stock is available at a price to earnings multiple of 7x while comparable peers are trading at an average multiple of 6.6-12.7x. The company has a robust balance sheet and is available at an attractive dividend yield of ~4%.
| Company Name | Face Value | EPS | PE Ratio | RoNW | NAV |
| Rail Vikas Nigam Ltd | 10 | 2.73 | 6.95 | 14.52% | 18.83 |
| IRCON International Ltd | 10 | 42.13 | 9.5 | 10.98% | 383.64 |
| RITES Ltd | 10 | 17.64 | 10.48 | 17.28% | 102.6 |
Brokerage Recommendations:
| Brokerage | Recommendations |
| ICICIDirect | Subscribe |
| Centrum | Fairly priced |
| Canara Bank Securities | Fairly priced |
Important Dates:
| Finalization of Basis of Allotment | on or Before 8th April 2019 |
| Initiation of Refunds | on or Before 9th April 2019 |
| Credit of Equity Shares: | on or Before 9th April 2019 |
| Listing Date: | on or Before 11th April 2019 |
Subscription Details: (Will be Updated)
| (Subscription-Category-Wise (no. of times) Till time : 06:00 PM) | Shares Offered | Day-1 | Day-2 | Day-3 |
|---|---|---|---|---|
| QIB | 12,64,00,000 | 0.00 | ||
| NII | 3,79,20,000 | 0.02 | ||
| Retail | 8,84,80,000 | 0.24 | ||
| Employee | 6,57,280 | 0.16 | ||
| TOTAL | 25,34,57,280 | 0.09 |
Should you invest:
The company revenues are steady and have strong order book. The IPO price is also reasonable as compared to its peers. The company has good dividend yield (4% in 2018). You can consider investing for long term, but not sure that you will be able to see much listing gains. I normally donot prefer PSU IPOs – I do not have any personal interest in investing in this IPO.