Govt to sell additional shares in IRFC as offer for sale receives robust bids
New Delhi: The government's stake sale in Indian Railway Finance Corporation Ltd (IRFC) received a strong response from institutional investors on Wednesday, with the issue
New Delhi: The government's stake sale in Indian Railway Finance Corporation Ltd (IRFC) received a strong response from institutional investors on Wednesday, with the issue subscribed 1.86 times on the first day. The Centre has decided to exercise the greenshoe option in view of the robust demand, enabling it to sell an additional 1% stake in the state-run company. The Department of Investment and Public Asset Management (DIPAM) secretary Arunish Chawla said in a post on X that the offer for sale (OFS) had been subscribed 1.86 times on the opening day and that the government would exercise the greenshoe option to meet excess investor demand. “Retail investors and eligible employees can place bids on Thursday,” said Chawla. Quick answers to key questions • 5 QUESTIONS 1 What is the purpose of the Indian Railway Finance Corporation's Offer for Sale (OFS)? ⌵ The purpose of the OFS is to divest up to 2% of the government's equity stake in the Indian Railway Finance Corporation (IRFC) to raise capital and enhance liquidity.
2 Why did the government decide to exercise the greenshoe option during the IRFC OFS? ⌵ The government exercised the greenshoe option due to robust demand from investors, allowing it to sell an additional 1% stake in IRFC beyond the initial offering. 3 How has the market reacted to the IRFC share sale in terms of investor interest? ⌵ The market has shown strong investor interest, with the initial share sale being subscribed 1.86 times on the opening day, indicating confidence in IRFC's business model and growth prospects. 4 Should retail investors consider participating in the IRFC OFS? ⌵ Yes, retail investors may consider participating in the OFS, especially given the attractive floor price set and the positive response from institutional investors, although they should monitor market conditions. 5 What financial implications does the IRFC stake sale have for the government? ⌵ The IRFC stake sale is expected to raise approximately ₹2,379 crore for the government, contributing to its broader disinvestment strategy aimed at raising ₹80,000 crore. Also Read | IRFC expands beyond Indian Railways with ₹13,527-crore loan for Hyderabad Metro The government had initially planned to sell a 1% stake in IRFC, with an additional 1% over-allotment option to meet excess demand.
The floor price for the issue was fixed at ₹91 per share, representing a discount to the prevailing market price. At the floor price, the government is expected to raise about ₹2,379 crore from the share sale. The IRFC stock fell 6.2% to settle at ₹92.53 on the BSE on Wednesday. The government currently holds 11.06 billion shares, equivalent to an 84.65% stake in IRFC. Based on the previous day's closing price of ₹98.69 per share, the value of the Centre's holding is estimated at ₹1.09 trillion, while the company's total market capitalisation stands at ₹1.29 trillion. Confidence reflected Ranjanesh Sahai, former secretary in the Railway Board, said that the strong investor response reflects confidence in IRFC's evolving business model, diversified financing portfolio and growth prospects. “IRFC has graduated from being a financier confined to the Railways. With the railway budget being merged with the general budget, IRFC’s future had seemed unclear. However, with its basket of institutional borrowers expanding over time and its books becoming increasingly robust, it has pleasantly surprised the investment community with a quantum jump in both scale and reputation,” said Sahai.
The BriefWire