Shares of RailTel listed at a premium on exchanges today. At 10:27 am, shares were up 20% at ₹115 as compared to issue price of ₹94. The IPO of RailTel was subscribed over 42 times and it had a price range of ₹93-94 per share. The ₹819 crore IPO of RailTel was open between February 16 and February 18. The government sold 27.16% stake in this issue.
In comparison, BSE Sensex was down over ₹1.6%. Shares of another Railway related company IRCTC were trading 3% higher today.
The retail individual investors 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 ₹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 subscribe to the issue.
“RailTel derives 66% 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 fiberisation needs’ perspective. It could also play a key role in 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% and 2.5% respectively from FY18 to FY20. There is high dependence on government entities and concentration risk given that 23.8% of its revenues comes from top 3 customers. Its presence in a highly regulated industry is another cause of concern,” she added.