Finance Ministry kick-starts listing process of 3 Rail PSUs

IRCTC, IRFC, IRCON listing process begins. Bankers scramble for IRCTC mandate. The high interest could lead to fierce bidding among bankers and see them quote low fees.The government is considering divesting a portion of the paid-up equity share capital through an IPO and has sought Expression of Interest (EoI) from merchant bankers by 16th March.

NEW DELHI: Within three weeks of Budget announcement, the Finance Ministry today started the process of listing three rail PSUs – IRCTC, IRFC and IRCON. The government is considering divesting a portion of the paid-up equity share capital through an IPO and has sought Expression of Interest (EoI) from merchant bankers by March 16.

Investment bankers are scrambling to grab the mandate for the proposed initial public offering (IPO) of Indian Railway Catering and Tourism Corporation (IRCTC), which sells railway tickets online. The government had invited bankers to make presentations, which saw participation of both foreign and domestic banks. “The issue could generate a lot of foreign investor interest due to the company’s strong position in the domestic e-commerce space,” said a banker, explaining their interest around the IPO.

The Department of Investment and Public Asset Management (DIPAM) is scouting for merchant bankers to manage the initial public offering (IPO) of the three PSUs, which is under the administrative control of the Rail Ministry. The government currently holds 100 percent stake in these three companies. In his 2017-18 Budget speech, Finance Minister Arun Jaitley said that the government will put in place a revised mechanism and procedure to ensure time-bound listing of identified CPSEs on stock exchanges as the it will foster greater public accountability and unlock their true value.

The government currently holds 100% stake in these three companies. In his 2017-18 budget speech, finance minister Arun Jaitley said that the government will put in place a revised mechanism and procedure to ensure time-bound listing of identified CPSEs on stock exchanges as the it will foster greater public accountability and unlock their true value.

“The shares of Railway public sector enterprises (PSEs) like IRCTC, IRFC and IRCON will be listed in the stock exchanges,” Jaitley had said in his speech. The government intends to raise Rs 72,500 crore through disinvestment of PSUs in the next fiscal. Of this, Rs 46,500 crore would be raised through disinvestment of minority stake and Rs 11,000 crore through strategic sale.

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Service Charge waiver on e-Tickets may hamper IRCTC’s listing

Indian Railway Catering and Tourism Corporation’s (IRCTC) plan to see itself listed on the stock exchange might hit a roadblock as the waiver of service charge by the government on online ticket booking could lead to losses making the stock unattractive to investors.

In the 2017 Union Budget, Finance Minister Arun Jaitley had announced the waiver on service charge for digital payments allowed in the wake of demonetisation will continue. However, rail officials and market experts are of the opinion that there will be no takers of the shares of the company if this continues. A top rail ministry official said that listing potential of the company will go down since it will not be profitable if the service charge waiver continues.

The matter will be discussed when the road map for listing Indian Railway Catering and Tourism Corporation is prepared. A railway official said that they had expected the waiver to be temporary but now it appears to be permanent. This will impact the company and there will be little interest from investors.

Earlier this month, Railway Financial Commissioner Shahzad Shah had said the railways is not prepared for listing. He had also said the removal of service charge was a major setback to Indian Railways. Various concessions on rail tickets have pinched the pockets of this sector. And, now with one more dispensation, Railways will have to worry about its business.

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