Centre looking into stake sale in Indian Railway Finance Corp, stock rises in intraday trade

The Centre is reportedly exploring a stake sale in Indian Railway Finance Corporation (IRFC), Reuters said on Wednesday. IRFC is a dedicated funding arm of Indian Railways, which borrows funds from financial markets to finance the acquisition/creation of rolling stock/project assets. These assests are then leased out to the Indian Railways as a finance lease.

The government owns a little over 86 per cent in the funding arm.

"The stake sale would take place soon," a government official quoted by Reuters said.

The official added that while the government is yet to decide the exact quantum of sale, it will aim to sell up to 11.36 per cent in multiple tranches, as per the plan so far. At the current market price, sell of 11.36 per cent would fetch the government around Rs 7,600 crore.

To make the central public sector enterprise compliant with Sebi’s minimum public shareholding (MPS) norm, the government has to dilute its 11.36 per cent stake in IRFC.

As per MPS norm, a listed entity must have a minimum public float of 25 per cent within five years of listing.

The government listed IRFC on stock exchanges in January 2021. The share sale consisted of a fresh issue of shares by the company and an additional 4.55 per cent stake dilution by the government.

Since the market opening, shares of IRFC hit a new high of Rs 52.71, gaining nearly 4 per cent on the BSE. Till 11.20 AM, a combined 121 million equity shares, which is about 0.93 per cent of total equity of IRFC, had changed hands on the NSE and BSE.

In the last one month, shares of IRFC have delivered 62 per cent returns to shareholders.

At 12.50 PM, shares of IRFC were trading at Rs 51.33 apiece, up by 0.84 per cent.

Last week, the financial arm of the Indian Railways reported a 6.3 per cent year-on-year fall in its net profit for the fiscal's first quarter ended June (Q1FY24) to Rs 1,556.6 crore. The company had reported a profit of Rs 1,661.6 crore in the year-ago period. Sequentially, net profit was up 17.2 per cent from rs 1,327.7 crore in Q4 FY23.

The company's total revenue from operations climbed 18.7 per cent on year to Rs 6,679.2 crores during the quarter ended June from Rs 5,627.4 crore in Q1FY23. Total income rose to Rs 6,681.0 crore in the first quarter. It stood at Rs 5,627.5 crore in the year-ago period.

IRFC is a Schedule ‘A’ Public Sector Enterprise under the administrative control of the Ministry of Railways (MoR), and has played a decisive role in expansion of the Indian Railways.

On July 27, IRFC signed a Memorandum of Understanding (MoU) with RITES to strengthen cooperation in financing & development of Railway Infrastructure Projects. The deal aims to identify mutual areas of collaboration with IRFC’s to provide financial assistance to projects/ institutions that have backward and or forward linkages with the Railways.

Last month, the Centre announced the 'Offer for Sale' of Rail Vikas Nigam Ltd's 5.36 stake. In a stock regulatory filing, the company said the floor price for the RVNL OFS will be Rs 119 per equity share. This is at a discount of nearly 11 per cent from RVNL's market price on July 26.

"Offer for sale in RVNL opens tomorrow for non-retail investors. Retail investors can bid on Friday. The government will divest 5.36 percent equity including a green shoe option of 1.96 percent," Department of Investment and Public Asset Management (DIPAM) secretary Tuhin Kanta Pandey said in a tweet.

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