IRCTC IPO: PSU share likely to list at 64% premium over issue price

The allotment of shares for the initial public offer (IPO) of Indian Railway Catering and Tourism Corporation (IRCTC) will be held from October 9 to October 10 and tentative listing date of the firm on bourses is October 14. Geetanjali Kedia, senior research analyst at SPTulsian.com expects the IRCTC share to list at around Rs 520-Rs 525. That amounts to 64% premium to the issue price of Rs 320 at the higher end.

Bids for IRCTC shares were invited in a price band of Rs 315 to Rs 320 during the IPO held from September 30 to October 3.

"The grey market premium of around Rs 200 captures the value of the business. Further gains will depend on how the company ramps up its e-ticket business, how its private train project ramps up and when the new water bottling plants come up," Kedia told The Economic Times.

Alankit Assignments, the registrar of the IRCTC IPO, will conduct the process of share allotment and refund processing.

The IRCTC IPO was subscribed nearly 112 times on the last day of bidding on October 3 making it the most successful IPO by a public sector enterprise. It was also the most successful IPO in over 20 months.

Also read: IRCTC IPO commands 50% premium in grey market

Strong demand from institutional and HNI investors led to such a huge oversubscription in IRCTC IPO.

The IPO received bids for 225.39 crore shares compared to the issue size of 2.01 crore shares. The issue was subscribed 111.80 times. The portion for retail investors was subscribed 15 times.

Jimeet Modi, Founder & CEO at SAMCO Securities said, "For the first time, the market witnessed frenzy in IPO segment although IRCTC was oversubscribed around 112 times, the retail portion got only 15 times oversubscription. This means retailers are still not convinced about the future prospects of the economy. Nonetheless, this also indicates that a bigger bull market is ahead of us because unless retail investors turns super bullish, a top cannot be made."

While portion for qualified institutional buyers was subscribed 108.79 times, non-institutional investors put in bids for 354.52 times their allotted size till October 3.

The IPO which has been a huge hit among investors was fully subscribed on the second day of bidding on October 1. On the first day of bidding, the Rs 645-crore IRCTC IPO was subscribed 81.31%. The IPO received bids for 1,63,94,040 shares compared to 2,01,60,000 or 2.01 crore equity shares on offer on the first day.

The public issue is a part of the government's divestment programme for the financial year 2019-20. The government which owns 100% in IRCTC plans to sell 12.6% stake in the firm.

After the IPO, government's stake in the firm will fall to 87.4%. IRCTC is engaged in internet ticketing, catering, packaged drinking water and travel and tourism. IRCTC has also diversified into other businesses, including non-railway catering and services such as e-catering, executive lounges and budget hotels. The issue involves sale of 2.01 crore equity shares of face value of Rs 10 each in a price band of Rs 315 to Rs 320.

Post listing, market capitalisation of the government-owned firm is pegged at Rs 5,120 crore at the higher end of price band. Book running lead managers to the offer are IDBI Capital Markets & Securities, SBI Capital Markets and YES Securities (India). The company would not receive any proceeds from the IPO and "all proceeds shall go to shareholders", IRCTC said.

IRCTC is engaged in internet ticketing, catering, packaged drinking water and travel and tourism. IRCTC has also diversified into other businesses, including non-railway catering and services such as e-catering, executive lounges and budget hotels.

By Aseem Thapliyal