A Mini Ratna (Category-I) Public Sector Enterprise – RailTel is an information and communications technology (ICT) infrastructure provider and is one of the largest neutral telecom infrastructure providers in India. The company was incorporated on 26 September 2000 with the aim of modernizing the existing telecom system for train control, operation, and safety and to generate additional revenues by creating nationwide broadband and multimedia network by laying optical fibre cable by using the right of way along railway tracks. As of 30 June 2020, its optic fibre network covering over 55,000 route kilometres and 5,677 railway stations across towns and cities in India.
Railtel provides telecom solutions and has an exclusive right to install optical fibre cables along the railway tracks. Currently, the optic fibre network set up by the company covers as many as 5848 railway stations in India. RailTel is one of the largest neutral telecom infrastructure providers in India. As of June 30, 2020, the company had the exclusive right of way along 67,415 route kilometres connecting 7,321 railway stations for laying optical fibre cable.
The company has over 55,000 route kilometres of optical fibre cable network and have connected 5,677 railway stations across towns and cities in India as of June 30, 2020. RailTel is also an implementing partner for the Bharat Net project to create optical fibre cable-based broadband infrastructure in laying optical fibre cable across 36,000-gram panchayats in India.
RailTel serves as a key network for the Indian Railways and provides a variety of services to the Indian Railways. The company is also working with the Indian Railways to transform railway stations into digital hubs by providing public Wi-Fi at railway stations across India. Company is currently in the process of bidding for the project in Africa that include supply, delivery, installation, testing and commissioning of goods and service for digital literacy in public primary schools in Kenya.
The company operates data centres in Gurugram, Haryana and Secunderabad, Telangana to host and collocate critical applications for customers including the Indian Railways. In addition, it undertakes various ICT projects for the Indian Railways, central government, and state governments, including various train control system projects for Indian Railways.
Competitive Strengths
- Among the largest neutral telecom infrastructure providers in India with a pan-India optic fibre network.
- Implementing partner for the Bharat Net project.
- A key partner to the Indian Railways in digital transformation.
- Plans to Expand services outside India.
Risk and Concerns
- There is almost no growth in the company’s bottom line.
- Pure OFS wherein the company will not be getting anything.
- Timely payments from the PSUs are also difficult
- Very high receivables, almost 50% of revenue.
- RailTel is totally dependent on PSUs and Railways wherein getting timely projects is a cumbersome task.
Objects of the Issue:
The IPO proceed will be utilized towards the following purposes:
- To carry out the disinvestment plan.
- To achieve the benefits of equity share listing on the stock exchanges.
IPO Details:
Basic IPO details |
|
| Subscription Dates | 16 – 18 February 2021 |
| Price Band | ₹93 to ₹94 Per Share |
| Fresh issue | Nil |
| Offer For Sale | 87,153,369 shares |
| Total IPO size | ₹810-₹819 Crores |
| Minimum bid (lot size) | 155 Shares and in multiples thereof |
| Face Value | INR10 per share |
| Retail Allocation | 35% |
| Listing On | NSE, BSE |
Tentative Timetable
- Railtel IPO Price Band announced on 11 Feb 2021
- Railtel IPO Anchor List
- Railtel IPO Opens on 16 Feb 2021
- Railtel IPO Closes on 18 Feb 2021
- Railtel IPO Allotment Date: 24 Feb 2021
- Unblocking of ASBA 24 Feb 2021
- Credit to Demat Accounts 25 Feb 2021
- Railtel IPO Listing date: 26 Feb 2021
Financial Performance:
| RailTel’s financial performance (in INR crore) | ||||
| FY2018 | FY2019 | FY2020 | ||
| Revenue | 1,021.2 | 1,038.3 | 1,166.0 | |
| Expenses | 835.1 | 820.6 | 931.9 | |
| Net income | 134.0 | 135.4 | 141.1 | |
| Net margin (%) | 13.1 | 13.0 | 12.1 | |
Outlook:
Eyeing the growth in railway tracks and their monopoly in the market it is expected that Railtel is expected to do much better in the near future. The company is debt-free and has a CAGR growth of 7.47 from FY18 to FY20 revenue. However, the margins of the company are decreasing YoY. If the company can manage the margin then we may expect the company to perform much better in the near future.
In FY18 the net income was INR 134 cr while in FY20 the net income was INR 141.1 cr which grew marginally at a CAGR of 1.74%. The company has high cash and bank balance of around 368 cr. The company has a consistent track record of paying dividends. At an upper price band of INR 94 with an EPS of INR 4.40, the PE ratio stands at 21 and PB stands at 2.2. The valuation of the company looks very attractive at the current levels. Thus, We assign a “Subscribe” rating for the Railtel IPO.
