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Govt shortlists investment banks for IRFC IPO

LiveMint logoLiveMint 25-04-2017 Swaraj Singh Dhanjal

The department of investments and public assets management on Tuesday shortlisted investment banks to manage the initial public offering (IPO) of Indian Railways Finance Corp. Ltd (IRFC), said two people aware of the development.

IRFC is a unit of the Indian Railways that helps raise financing for various other units of the railways.

The department had invited bankers for presentations and bid submission for IPOs of three railway firms—Indian Railway Catering and Tourism Corp. (IRCTC), IRCON International Ltd and IRFC.

“Presentations for all three companies were held on Monday in Delhi. For IRFC’s IPO they have shortlisted three banks so far, which are IDFC Bank, ICICI Securities and HSBC. Shortlisting of bankers for the other two companies is also expected soon,” said one of the two people cited above, both of whom requested anonymity.

According to the second person, the IRFC initial share sale could see the government divest a stake worth at least Rs2,000 crore. “The revenue model for IRFC is that it charges a flat commission on the funds it raises for the railways. The company raises huge volumes of capital given the requirements of the Indian Railways,” he said.

According to IRFC’s annual report for fiscal year 2014-15, the firm helped the railways raise over Rs1.5 trillion. The company reported revenue of Rs7,506 crore and profit of Rs848.6 crore in 2015-16.

A spokesperson for the department of investments and public assets management could not immediately be reached for comment. Emails sent to IDFC Bank and ICICI Securities did not elicit any response. HSBC declined to comment.

IRCTC handles almost 60% of railway ticket bookings, while IRCON is the infrastructure and engineering arm of the railways.

IRCON, which has operations in several states of India and overseas including Malaysia, Nepal, Bangladesh, Mozambique, Ethiopia, Afghanistan, the UK, Algeria and Sri Lanka, had a net worth of around Rs3,530 crore in 2015-16.

The public listing plans of these railways companies is part of the large divestment drive that the government has launched this fiscal year, which has seen the department of investments and public assets management put out “requests for proposal” for over a dozen state-owned companies either through IPOs or offer for sale or strategic divestments.

On Monday, Mint reported that New India Assurance Co. Ltd (NIA) and General Insurance Corp. of India Ltd (GIC) have hired investment banks to manage their initial public offerings (IPOs) as the government seeks to pare its stake in the state-run insurers.

To abide by the mandated 25% public shareholding in listed companies and unlock their value, the cabinet committee on economic affairs on 13 April approved the listing of 11 central public sector enterprises, Mint reported.

The list also includes other railway subsidiaries such as Rail Vikas Nigam Ltd and RITES Ltd.

Other state-owned firms that have been cleared for IPOs include three defence ministry enterprises, Bharat Dynamics Ltd, Garden Reach Shipbuilders and Engineers Ltd and Mazagon Dock Shipbuilders Ltd, besides MSTC Ltd and Mishra Dhatu Nigam Ltd, controlled by the steel ministry, and North Eastern Electric Power Corp. Ltd, which is under the power ministry.

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