The Rs 46,330 million Indian Railway Finance Corporation (IRFC) initial public offer opened today for subscription, in the price band of Rs 25-26 a share. The issue will remain open till January 20.

The dedicated market borrowing arm of the Indian Railways has allocated 534.5 million equity shares at Rs 26 per share on Friday to anchor investors.

The first public issue of IRFC has subscribed 25% so far on January 18, the first day of bidding. The offer has received bids for 383.9 million equity shares against an IPO size of over 1,247.5 million equity shares.

Commenting on the IPO, broking firm IDBI Capital Markets & Securities said, "IRFC (registered as NBFC) is wholly owned by GOI and administered through the Ministry of Railways (MoR). IRFC is a market borrowing arm of Indian railways and is primarily in the business of leasing operation and financing of project assets.

In FY20, AUM of IRFC grew by 32.4% YoY and disbursement by 35.9% YoY. IRFC saw a strong growth during FY20, NII grew at 16.2% vs 9.2% in FY19, PPoP by 14.8% vs 9.9% in FY19, PAT saw a strong growth of 49.2% vs 6.9% in FY19 as it is not required to pay MAT tax.

As a borrowing arm, IRFC financed 48.2% of Capex of Indian railways through various sources of funding from market. At upper price band, IPO is priced at a P/E of 7.6x and P/BV of 1.0x based on FY20 with ROA of 1.3%. As backed by GOI with nil asset quality and strong CAR at 434% and ROA of 1%+, we recommend subscribing the issue."

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