India govt seeks $415 mn valuation for state-run RailTel in IPO

 India govt seeks $415 mn valuation for state-run RailTel in IPO

India’s government is seeking a valuation of Rs 3,107 crore ($415.5 million at current exchange rates) for the state-owned RailTel Corporation of India Ltd through an initial public offering (IPO) beginning next week.

The government has set a price band of Rs 93-94 per share for RailTel’s IPO, the company said Thursday. The public offering will open on February 16 and close two days later.

The government will sell 87.15 million shares, or a 27.15% stake, of the company in the IPO. It will raise as much as Rs 820 crore ($113 million) at the upper end of the price band through the offer for sale (OFS).

A successful offering and listing will dilute the government’s holding to 72.84% from 100%. The company isn’t selling any fresh shares.

An OFS is a secondary market transaction to help promoters — the government in RailTel Corp’s case — to sell their stake in the respective company without issuing new shares.

India’s capital markets regulator, the Securities and Exchange Board of India (SEBI), had introduced the OFS mechanism to help the government and state-owned firms raise capital by diluting their ownership.

RailTel’s IPO is part of the government’s asset-sale programme for the financial year 2020-21. The government had in February 2020 set a target to raise Rs 2.1 trillion (about $30 billion) from asset sales with a view to compensate for the shortfall in tax revenue and increase spending on social and infrastructure projects.

However, the government revised the estimate to Rs 32,000 crore earlier this month. So far, the government has managed to mop up about Rs 19,500 crore this fiscal year by selling stakes in 11 companies, according to data published by the Department of Investment and Public Asset Management (DIPAM).

For the fiscal year that begins in April, the government has set a disinvestment target of Rs 1.75 trillion ($24.1 billion).

RailTel was incorporated in September 2000 to modernise the telecom system for train control and operations, besides improving the safety standards, with an aim to generate additional revenue.

The government planned to create a nationwide broadband and multimedia network by laying optical fibre cable along the railway tracks.

At the end of January 2021, RailTel’s optical fibre network covered 59,098 route km by connecting 5,929 railway stations across various cities and towns in India. The company has no listed peers in India.

ICICI Securities, IDBI Capital Markets and Securities, and SBI Capital Markets are the merchant bankers arranging and managing the RailTel IPO.

Ankit Doshi

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