IRCTC IPO: Investors’ wealth doubled but railways not happy. Here’s why

New Delhi: Investors who got allotment in Indian Railway Catering and Tourism Corporation’s (IRCTC’s) initial public offer (IPO) may be rejoicing as their money doubled within few days but the Indian Railways is not happy with the pricing of the IPO.

In the recently concluded IPO, IRCTC shares were offered at Rs 320 to the investors whereas employees and retail investors got the shares at Rs 10 discount — at Rs 310 — through the book-building process. At the IPO price, the company was valued at around Rs 5,000 crore. Through the IPO, the government raised Rs 645 crore by selling 12.6% stake in the national carrier’s ticketing arm.

The IPO got an overwhelming response from investors and was subscribed a whopping 112 times. Analysts say attractive valuation of the company was the main reason behind this subscription.

On Monday, IRCTC shares were listed at Rs 644 compared to the issue price of Rs 320 and closed at Rs 729, valuing the company at Rs 11,700 crore. This was more than double the IPO valuation.

According to a leading daily, Indian Railways has lodged a protest about the price at which shares were offered to investors and has sought better due diligence for future transactions, given the long pipeline of public offers of state-run companies.

The blockbuster listing of the IPO has raised a question mark over the valuation undertaken by the merchant bankers. IDBI Capital Markets, SBI Capital Markets and Yes Securities were bankers to the issue.

Worth mentioning here is that the earlier there was a proposal to list IRCTC two years back. But Railway Minister Piyush Goyal opposed the plan as the company was valued at around Rs 2,500 crore at that time. After the demonetisation, IRCTC has stopped collecting service charges on ticket bookings, bringing down its overall revenue.

When the bankers came with the plan two years later, the valuation had doubled, but railways was still unwilling to list the company, arguing that the valuation could be higher. But with the department of investment and public asset management (Dipam) pushing the issue to meet the record disinvestment target of Rs 1.05 lakh crore, railways opted to go with the listing, the publication mentioned.

The railway’s concern can have an implication on other public offers as well as other disinvestment proposals.

As of 12:10 pm, IRCTC shares traded 0.5% higher at Rs 704 apiece, compared to its issue price of Rs 320.