The maiden issue public issue of RailTel Corporation, an Information and Communications technology (ICT) infrastructure provider and one of the largest neutral telecom infrastructure provider in the country, has opened for subscription today and will be available for subscription till the 18th of February 2021.
RailTel Corporation is a Category-I PSU, which is wholly owned by the Government of India and functions under the administrative control of the Ministry of Railways. Incorporated in the year 2000, the Mini Ratna company owns a pan-India optic fibre network on exclusive right of way (ROW) along railway tracks.
The proceeds from the IPO would be received by the government as a part of its disinvestment objective by selling of 8,71,53,369 equity shares held the government in the company.
Some quick facts about the RailTel Corporation IPO:
Price band
The price band for the IPO is set at Rs. 93 to Rs. 94 per share.
Lot size
The minimum lot size is of 155 shares. An individual retail investor can bid for a maximum of 13 lots or 2155 shares.
Issue size
The issue size for is Rs. 87,153,369 crores at the higher price band.
Listing date
Shares of RailTel Corporation are expected to be listed around 26th February 2021.
Key strengths and opportunities
Largest neutral telecom infrastructure provider in the country
RailTel Corporation is the largest neutral telecom infrastructure providers in India. As of June 30, 2020, the company had an exclusive right of way along 67,415 route kilometers connecting 7,321 railway stations for laying optical fiber cable.
Diversified portfolio of services and solutions
RailTel Corporation offers a diversified portfolio of ICT services and solutions including MPLS-VPN, leased lines services, large network hardware system integration, TPaaS, e-Office services, data center services, software and digital services.
Important partner to the Indian Railways in digital transformation
As a part of its strategic partnership with the Indian Railways, RailTel Corporation provides critical connectivity services such as video surveillance system at stations and within trains, ‘e-Office’ services and implementing short haul connectivity between stations and long haul connectivity to support various organizations within the Indian Railways. The company also provides various passenger services including content on demand services and Wi-Fi across major railway stations in India.
Consistent track record of financial performance
RailTel Corporation has a consistent track record of financial performance and growth. The company has been making consistent profits since 2007 and has been paying dividends on a regular basis since 2008.
In the financial years 2018, 2019 and 2020, the company has paid dividend of ₹ 515.30 million, ₹ 624.70 million and ₹ 462.00 million, respectively. During the same period, the company’s revenue from operations have grown at a CAGR of 7.47% from ₹ 9,767.69 million in Fiscal 2018 to ₹ 11,280.54 million in Fiscal 2020.
In FY 2020, Railtel Corporation reported the highest net profit margin among key telecom companies and key IT/ICT Companies in India, with a net profit margin of 12.50%.
Professionally well-managed company
RailTel Corporation is professionally well-managed company with with strong corporate governance and senior management team with extensive experience in the industry.
Key challenges to consider while investing in RailTel Corporation IPO:
In its Red Herring Prospectus, the company has listed some factors which may impact the future performance of the company, such as:
Intense competition from Pan-India players in the industry
There is intense competiton in the ICT sector from companies such as Bharti Airtel, Reliance Jio Infocomm, BSNL and MTNL.
Threat of new entrants in the segment
Given the huge growth opportunities in the sector, the emergence of new entrants in the sector may pose a significant challenge to RailTel Corporation.
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Read more: How Long-term investing helps create life-changing wealth – TOI.