Next station, IPO subscription!

Indian Railway Finance Corporations issued its IPO valued at ₹4,633cr ($633.3m). The subscription, offered in the price band of ₹25-26 ($0.3), was the first IPO by an NBFC in the public sector. IRFC is a wholly-owned PSU which engages in leasing operations and financing of Project Assets wherein it requires leasehold interest in the asset and the Railway Ministry pays rentals.

IRFC will go public on the BSE and NSE offering 575 crore shares. The President of India, who is the statutory promoter is likely to offload a 13.6% stake in the company which boasts the highest credit ratings for an Indian issuer. The low-risk and cost-plus business model hints at positive asset valuations and management.

RBI has exempted the company from the scope of its asset classification and prudential norms. There is a high dependence on the Indian Railways through lease and rental payments that have, so far, catered to its reserves. This can make IRFC susceptible to changing dynamics in the business. Given the current status of the finances and credit outlook, subscribing to the IPO may be profitable.

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