The government proposes to push through initial public offers (IPOs) of the five railway subsidiaries, including Rail Vikas Nigam Limited (RVNL) and RITES, in the last quarter of the current financial year.

The IPOs are aimed at mobilising in excess of Rs 8,000 crore while allowing the companies to get listed and comply with mandatory 25 per cent public holding norm.

Sources said that public offers would involve offloading 25 per cent government stake in the railway subsidiaries at one go. But the stake sale may be staggered in case of larger companies like the Rail Vikas Nigam Limited, so as to get maximum valuation.
Railway’s profit making subsidiaries, investment banking sources said, would be marketed to anchor institutional investors in very attractive ways so that their portions are fully booked at the time of the road show.

“Indian Railways is a brand and selling it to investors would not be a problem”, said a source. 

On the expected proceeds, the banker said that the government had a conservative target of Rs 11,000 crore receipts from four government insurance company IPOs.

But the first company, General Insurance Corp of India (GIC Re), which went public, fetched the entire amount at one go by raising Rs 11,470 crore.

The IPOs of Indian Railways Finance Corp (IRFC), Ircon and RVNL are in different stages of preparation to hit the market in January next year. 

Sources said RVNL is likely to be the first one to be flagged off. Three book-running lead managers have already been appointed for the IRFC IPO, namely IDFC, HSBC, ICICI Securities and SBI Caps.

IDBI Capital Markets, SBI Caps and Axis Capital have been appointed for the Ircon IPO.

Finance minister Arun Jaitley had announced Indian Railways’ plans to list its subsidiaries this year after merger of the railway budget with the Union budget.

While IRCTC has been leader in e-commerce in India and handles almost 60 per cent of railway ticket bookings, IRFC is the sole financier of railway projects by sourcing low-cost funds from the market.

IRCON, the infrastructure and engineering arm of the railways, also builds projects overseas for governments and private parties.

The government is already in the process of meeting its sell-off agenda, which has budgeted to raise Rs 72,500 crore through disinvestment in central public sector enterprises (CPSEs) in 2017-18, which is higher than the Rs 46,246.58 crore raised in the last fiscal.

As of now, the Centre has raised a total Rs 30,185.67 crore, out of which only HUDCO and Cochin Shipyards were IPOs.

While GIC Re had a piggyback IPO, recently the Rs 9,600-crore IPO of state-owned New India Assurance Company was subscribed 1.19 times.

Listing of public sector enterprises will foster greater public accountability and unlock the true value of these companies.

The government will put in place a revised mechanism and procedure to ensure time bound listing of identified CPSEs on stock exchanges, Jaitley had said earlier.

In a bid to adhere to the mandated 25 per cent public shareholding in listed companies and unlock their value, the cabinet committee on economic affairs (CCEA) in April this year had approved the listing of 11 CPSEs, which included railway subsidiaries – RVNL, IRCTC, IRCON, RITES and IRFC.

An investment banker associated with the railways PSU IPOs said the government is keen that all the five IPOs take place in the current fiscal with adequate time lag so the bunching does not reduce the appetite of the investors.

The government has plans to kick off divestment by offloading up to a 25 per cent stake in RVNL, a company involved in rail infrastructure and project development.   

"RVNL will be treated as a test case to be followed by other rail PSUs. But a 25 per cent stake will be sold in the entire five rail PSUs to ensure better revenues and to help improve the functioning of the firms and get them more resources, according to official sources.

RVNL-build rail infrastructure projects made a profit of Rs 287.59 crore in 2015-16, while its net worth stood at Rs 2,827.83 crore.

RITES, which is in the business of engineering consultancy and project management, had a post-tax profit of Rs 339 crore in 2015-16. Its net worth stood at Rs 1,803 crore.