New Delhi: The initial public offering (IPO) of railways consultancy firm RITES Ltd has seen strong demand with the issue being fully subscribed by noon on Thursday. At 2.45pm, the RITES IPO issue was subscribed 150%, according to data from NSE. The retail segment attracted strong demand and was subscribed 164% on Day 1 itself. RITES is the first state-owned firm to hit the IPO market in the current fiscal. The IPO will close on 22 June. The price band for RITES IPO has been fixed at Rs 180-185 per share with lot size of 80 shares and in multiples thereafter.
Elara Capital (India), IDBI Capital Markets & Securities, IDFC Bank and SBI Capital Markets are managing the RITES IPO. Many brokerages have given a “subscribe” rating to the RITES issue, citing attractive valuation.
In a note Centrum Wealth Research said: “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. RITES has good financials. Given RITES competence along with good track record, healthy financials and attractive valuations, we suggest that investors can subscribe to the issue.”
In the RITES IPO, the government is selling 12% or 2.52 crore equity shares, including 12 lakh shares to employees. At the upper end of the price band of Rs 185, the IPO would fetch around Rs 460 crore to the exchequer. The government holds 100% stake in the company.
“Over FY13-17, RITES registered revenue and net profit CAGR of 9% and 11%, respectively. Average EBITDA (earnings before interest, tax, depreciation and amortization) margins and RoE (return on equity) over the period stood at 28% and 18%, respectively. RITES is a virtually debt free company. As of 31 December 17, consolidated debt stood at Rs 70 crore, mainly pertaining to its subsidiary REMCL, with cash and equivalents of Rs 2,994 crore. For the nine months of FY18 revenue and PAT stood at Rs 936 crore and Rs 243 crore, respectively,” says Centrum Wealth Research.
Another domestic brokerage Angel Broking also has 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,” the brokerage said.
Motilal Oswal Securities Ltd (MOSL) finds its valuations to be attractive. “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%),” the brokerage said in a note.
With inputs from agencies