Shares of RailTel listed at a premium on exchanges today. The shares were up 20 per cent at Rs 115 as compared to the issue price of Rs 94. The IPO of RailTel was subscribed over 42 times and it had a price range of Rs 93-94 per share. The Rs 819 crore IPO of RailTel was open between February 16 and February 18. The government sold 27.16 per cent stake in this issue.
In comparison, BSE Sensex was down over Rs 1.6 per cent. Shares of another Railway related company IRCTC were trading 3 per cent higher today. The retail individual investor’s segment was subscribed over 16 times while qualified institutional buyers (QIBs) category 65.14 times and non-institutional investors 73.25 times. Ahead of the IPO, RailTel had raised Rs 244 crore from 14 anchor investors.
RailTel is a central public sector enterprise under the administrative control of the Ministry of Railway. It is an information and communications technology (ICT) infrastructure provider and one of the largest neutral telecom infrastructure providers in India.
RailTel also undertakes various ICT projects for the Indian Railways, central government, and state governments. Many brokerages had also recommended subscribing to the issue.
“RailTel derives 66 per cent of its revenues from the telecom segment while the remaining portion is from railways and other projects. RailTel, if performs efficiently can benefit from the 5G growth in India from a fabrication needs’ perspective. It could also play a key role in the digital transformation of the railways. Besides, Covid-19 has had a minimal impact on the telecom industry and has in fact triggered growth for certain players due to increased data usage and VPN services for people working from home,” said Nirali Shah, Head of Equity Research, Samco Securities.
“Since RailTel is a debt-free company and pays consistent dividends it could witness some traction but for long-term investors, there are a few red flags. Firstly, the company has delivered single-digit revenue and PAT CAGR of 7.5 per cent and 2.5 per cent respectively from FY18 to FY20. There is a high dependence on government entities and concentration risk given that 23.8% of its revenues come from the top 3 customers. Its presence in a highly regulated industry is another cause of concern,” she added.