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    IRFC IPO sees firm response; retail portion fully subscribed on Day 1

    Synopsis

    By 5:00 pm, the issue received bids for 808.9 million shares, which was 64.8 per cent of the total issue size of 1,247.5 million shares. Ahead of the IPO, IRFC said on Saturday that it had raised Rs 1,398.63 crore from 31 anchor investors. The issue will close for subscription on January 20.

    Agencies
    On the other hand, interest from qualified institutional investors remained low as only around 50,000 shares were subscribed out of 356.37 million shares allotted for them.
    MUMBAI: Indian Railway Finance Corporation's IPO took off to a strong note today, with the Rs 4,633-crore issue attracting 65 per cent bids on the first day.

    By 5:00 pm, the issue received bids for 808.9 million shares, which was 64.8 per cent of the total issue size of 1,247.5 million shares. Ahead of the IPO, IRFC said on Saturday that it had raised Rs 1,398.63 crore from 31 anchor investors. The issue will close for subscription on January 20.

    The demand today was led by retail investors as their allotted portion of 623.65 million shares was subscribed 1.25 times. On the other hand, interest from qualified institutional investors remained low as only around 50,000 shares were subscribed out of 356.37 million shares allotted for them.

    Analysts said that the asking valuation at a price-to-book-value (P/BV) ratio of 1X looks attractive for long-term, conservative investors, considering the company’s strong profitability growth of 26.3 per cent during FY18-FY20, its double-digit return on equity (RoE) of 12.2 per cent in FY21, and the low risk profile of the business with zero gross non-performing assets (NPAs). But they are advising investors to consider the issue only for long-term gains.

    Astha Jain of Hem Securities said that while valuations look reasonable and she likes the low risk, strong asset liability management, and the cost-plus-business model of the company, she sees limited expansion on the margin and RoE fronts.

    “Looking at the strong business profile of the company, but with limited growth aspects, we give Subscribe rating for long term. That said, we are not expecting any major negative movement for the stock after listing,” Jain said.

    Anand Rathi finds the IPO valuation attractive. It said the company enjoys high credit worthiness, but is highly dependent on Indian Railways' capex plans.

    "The government has undertaken various policy interventions in order to liberalise the Railways including development of freight corridors, high speed railway and elevated corridors. It has also permitted 100 per cent FDI on automatic routes in a large number of railway infrastructure areas. Considering capex visibility, we recommend a 'subscribe' rating to this IPO with a long-term view," the brokerage said.
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