Finmin raises concerns over RVNL Investor meets

Tells Railway Ministry that management had presented a bleak picture of company’s future which could have impacted its IPO. The government has raised Rs 2,350 crore from the IPO of RVNL and the sale of ‘enemy property’ so far in this financial year.

NEW DELHI: The finance ministry has raised issues with the railway ministry over the recent initial public offering of Rail Vikas Nigam Ltd., contending that the management had painted a bleak picture of the company’s prospects at meetings with potential investors.

“At a few investor meetings, the top management, including the chairman, projected a bleak picture, saying there was no clear future business model for the company,” said an official aware of the developments, adding that the finance ministry had then highlighted the issue with the administrative ministry, stating that this could have an adverse impact on the public offering.

“It is for the administrative ministry to take a final call on such matters,” the official added.

In April, the government raised about Rs 476 crore by selling its 12% stake in RVNL, which mobilises funds and builds rail infrastructure. The government has now lined up an IPO of RailTel and is looking to sell a 15% stake in RITES through offer-for-sale mechanism.

According to an RVNL executive who did wish to be identified, the company’s management had only told the investors that the railway ministry had said after a review meeting that the practice of giving railway projects on a nomination basis to firms such as RVNL would be reconsidered by the Railway Board.

“The company has a responsibility to make investors aware of the present circumstances,” the executive said.

An email sent to RVNL remained unanswered till the time of going to print.

The rail ministry was looking to implement these rules in accordance with the general finance rules (2017), said another government official, adding that even after top rail ministry officials assured the management of RVNL that this may not impact its operations, the firm’s management told potential investors that the move had the potential to disrupt the company’s operations.

The government has approved the listing of five railway companies, including IRFC and IRCTC. IRCON and RITES were listed in 2018-19 and RVNL in April 2019.

The government has raised Rs 2,350 crore from the IPO of RVNL and the sale of ‘enemy property’ so far in this financial year.

Separately, the Railway Board has decided to continue to award work on nomination basis, citing capacity limitations and expeditious completion of projects.