Centre invites i-bankers to help manage share sale in IRCTC, IRCON, IRFC

Union Finance minister Arun Jaitley said the shares of railway public sector enterprises like IRCTC, IRFC and IRCON will be listed in the stock exchanges. The Centre is considering divesting a portion of the paid-up equity share capital through an IPO and has sought expression of interest from investment bankers by 16 March

NEW DELHI: The finance ministry on Monday invited proposals from investment bankers to help the government sell shares in three railway enterprises.

The three companies controlled by the railway ministry are Indian Railway Catering and Tourism Corp. (IRCTC), IRCON International Ltd and Indian Railway Finance Corp. Ltd (IRFC).

In advertisements published in newspapers on Monday, the Department of Investment and Public Asset Management (DIPAM), under the finance ministry, sought proposals from investment bankers by 16 March to manage the initial public offerings and advise the government in listing the stocks.

While IRCTC has been a pioneer in e-commerce in India and handles almost 60% of railway ticket bookings, IRFC is the sole financier of railway projects by sourcing low-cost funds from the market. IRCON, the infrastructure and engineering arm of the railways, also builds projects overseas for governments and private parties.

IRFC has railway assets worth Rs1,37,038 crore till March 2016. IRCON which has operations in several states of India and overseas including Malaysia, Nepal, Bangladesh, Mozambique, Ethiopia, Afghanistan, UK, Algeria and Sri Lanka has net worth of around Rs3,530 crore in 2015-16. Similarly, IRCTC which provides online ticketing service for Indian Railways along with catering in trains and rail neer has a Rs1,500 crore turnover.

Finance minister Arun Jaitley, in his budget speech on 1 February, said their listing will foster greater public accountability and unlock the true value of these companies.

Under the disinvestment policy, public sector enterprises (PSEs) having a positive net-worth, no accumulated losses and having earned profits in three preceding consecutive years are required to achieve 25% public holding.

A former railway board chairman speaking under condition of anonymity said the railways had already appointed SBI Capitals Markets Ltd to do a study for listing of these PSUs and the work would overlap now. He said the move is going to impact railways severely, especially IRFC, because it’s the biggest funding agency for the national monopoly carrier.

The government has set an ambitious Rs72,500-crore disinvestment target for 2017-18, against the revised estimate of Rs45,500 crore for 2016-17.

It has so far collected Rs27,917 crore through stake sales in public sector units in 2016-17, implying it aims to sell stakes (in state-owned companies) worth around Rs17,583 crore by 31 March.

The cabinet committee on economic affairs (CCEA) last month approved the public listing of five state-owned non-life insurance companies and reduction of the government’s stake in them to 75% from 100%.

Oriental Insurance Co., National Insurance Co., New India Assurance, United India Insurance and national reinsurer General Insurance Corp. of India, or GIC Re, are the five companies that will be listed on the stock exchanges.

The government will pare its stakes in these companies either through the sale of new shares or an offer for sale or through a combination of both, Jaitley said at a press conference on 1 February.

The government has also put in place a revised mechanism to ensure time-bound listing of identified PSEs on the stock exchanges.

Now the administrative department concerned and DIPAM will draw up a list of eligible PSEs for listing within a month from the finalization of audited accounts of the last financial year.

In cases of listing through a sale of government of India’s stake, CCEA approval for listing of identified PSEs will be obtained by DIPAM.

An inter-ministerial group will be constituted for the appointment of advisers to guide the process of disinvestment.

The process for the appointment of advisers for the transaction, including merchant bankers and legal advisers, will be completed within a period of eight weeks from the date of the constitution of the inter-ministerial group.

The total process—till the stock is listed on the stock market—will be completed within 165 days of the administrative department agreeing to an initial public offering, or IPO.