The state-owned Mini Ratna public sector enterprise RailTel Corporation of India is offering over 8.7 equity shares for the subscription. RailTel is aiming to raise Rs.819.24 crore through Initial Public Offering (IPO). However, all the money raised from IPO will go to the Government of India. The share offering will start from February 16 and will close on February 18. Most of the brokering agencies are recommending to buy the equity given the company’s debt-free balance sheet, consistent payment of dividends,s and an important role in the digital transformation of Indian Railways.
Market Experts are recommending to subscribe to RailTel IPO
Market experts are also pointing out its advantage over other telecom players in providing better margins and return ratios. Nirali Shah, Head of Equity Research at Samco Securities is of the opinion that RailTel can get a major benefit from the growth of 5G from a fiberisation needs perspective and can also play a key role in the digital transformation of Indian Railways.
“Since RailTel is a debt-free company and pays consistent dividends it could witness some traction”, Nirali added. However, she stated that for long-term investors, there are some red flags. “Firstly, the company has delivered single-digit revenue and PAT CAGR of 7.5 percent and 2.5 percent, respectively from F.Y.2018-19 to F.Y.2020-21. There is a high dependence on the Government entities and concentration risk is given that 23.8 percent of its revenues come from top 3 customers”, she concluded.
“RailTel’s margin and return ratios are better than the competitors”
As per IPO Central and IPO Guru, RailTel shares traded at a 48 percent premium to the issue price. Angel Broking is optimistic about the significant role of RailTel in the digital transformation of Indian Railways. The Broking Company said,” The Company’s margins and return ratios are better compared to other telecom operators in India. There are no listed peers for the company. The issue has been priced at 21.4XPE on an FY20 trailing basis, which is quite reasonable by looking at the strong future growth rates of the company”. It is important to note here that RailTel is one of the largest neutral telecom infrastructure providers in India with all India presence optical fiber network