The initial public offering (IPO) of PSU firm RITES (Rail India Technical and Economic Services Ltd), which was fully subscribed on Thursday, continued to see strong demand on Friday, the closing date of the issue. As of 5 pm, the RITES IPO was subscribed 66.71 times, according to NSE data. The price band of IPO was fixed at Rs 180-185 per share, with lot size of 80 shares and in multiples thereafter.
RITES is the first state-owned firm to hit the IPO market in the current fiscal. Elara Capital (India), IDBI Capital Markets & Securities, IDFC Bank and SBI Capital Markets are managing the issue.
Many brokerages had come out with “subscribe” rating to the RITES issue, citing attractive valuation. At the higher end of the price band of Rs 185, the issue is priced at P/E of 10.5x (post dilution) on FY17 and 11.4x on 9MFY18 (annualized) basis, which we believe is attractive,” Centrum Wealth Research said in a note.
Another brokerage Motilal Oswal has also suggested a “subscribe” on RITES issue. “As of FY18, RITES order book stood at Rs 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%),” Motilal Oswal said.
In the RITES IPO, the government is selling 12 per cent stake or 2.52 crore equity shares, including 12 lakh shares to employees. The government hopes to mop up around Rs 460 crore from the RITES issue.
“Over FY13-17, RITES registered revenue and PAT CAGR of 9% and 11%, respectively. Average EBITDA margins and RoE over the period stood at 28% and 18%, respectively. RITES is a virtually debt free company,” Centrum Wealth Research said in a report. The brokerage has a subscribe rating on RITES IPO.
“For the first nine months of FY18 revenue and PAT stood at Rs 936 crore and Rs 243 crore, respectively. RITES has been consistently paying dividends to shareholders,” Centrum added.
Another firm Angel Broking has also suggested a “subscribe” rating on the RITES issue. “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,” it said.
The government is also planning to list two of its railway PSUs – RVNL and IRFC – in the July-September quarter, PTI quoting a senior official said.