RITES IPO fully subscribed on Day-2, issue to close today

The RITES IPO, which closes today, received 5.24 crore bids against the total issue size of 2.52 crore, NSE data shows. The IPO has been fixed at ₹180-185 per share with lot size of 80 shares and in multiples thereafter.

MUMBAI / NEW DELHI: The initial public offering (IPO) of Railways consultancy firm RITES (Rail India Technical and Economic Services Ltd) was fully subscribed on Day 2.

The three-day IPO, which closes on Friday, received 5.24 crore bids against the total issue size of 2.52 crore, NSE data shows. RITES is the second railways public sector enterprise that is undergoing disinvestment and plans to raise around ₹466 crore by divesting 12.6% from its stake. The IPO has been fixed at ₹180-185 per share with lot size of 80 shares and in multiples thereafter. The Miniratna firm with net worth of ₹2,100 crore gets 60% of its revenue from consultancy services is the first government undertaking going disinvestment in the current fiscal. The firm’s first nine-month revenue for FY18 was about ₹1,061 crore with Ebitda margins between 32% and 42%. It currently has an order book of ₹4,850 crore.

Motilal Oswal Securities Ltd finds its valuations to be attractive. “As of FY18, RITES’ order book stood at ₹4,820 crore, 3.9 times order book to sales; thus providing strong revenue visibility. It is well diversified with consultancy services contributing 53%, followed by turnkey projects (29%), exports (15%) and leasing services (3%),” the brokerage said.

Another firm Angel Broking has also suggested a “subscribe” rating on the RITES issue. It said “Given that the RITES is a preferred consultant of Indian Railways along with other government authorities with exposure in international operation and fair valuation of issue, we recommend subscribe to the issue.”

The finance ministry had in 2017-18 planned to sell stakes in several railway PSUs including RITES, RVNL, IRCON, IRFC and IRCTC. A senior government official on condition of anonymity says, “The remaining rail PSU’s RVNL, IRCON and IRFC are likely to be listed in next quarter. As far as IRCTC is concerned the railway minister has some issues with the evaluation.”

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