Railways-Related IPOs Have Done Well; Should you Subscribe to IRFC?

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Railways-Related IPOs Have Done Well; Should you Subscribe to IRFC?
Credit: © Reuters.

By Aditya Raghunath

Investing.com -- Indian Railway Finance Corporation (IRFC) will open up its Rs 4,633 crore IPO on Monday, January 18 for subscription. The price band for the shares is Rs 25-Rs 26 each.

The company has a different business model and has no peers in the country. IRFC is the borrowing arm of the Indian Railways. Its growth is inextricably linked to the growth of the railway infrastructure in India.

Companies that work with/for Indian Railways have, by and large, performed well on the bourses. Indian Railway Catering And Tourism Corp (NS: INIR ) launched its IPO with a price band of Rs 315- Rs 320 per share in October 2019. Today, its shares are trading at Rs 1,455. Rail Vikas Nigam Ltd (NS: RAIV ) is currently trading at Rs 31.85. The company’s price band for its IPO was Rs 17 – Rs 19 in April 2019.

Rail India Technical and Economic Service Limited ( RITES Ltd (BO: RITS )) made its debut in June 2018. Its price band was Rs 180-Rs 185. The stock is currently trading at Rs 266.

Most brokerages have recommended a ‘buy’ on the stock. The projected annual capital expenditure in the Railways for FY20-25 is Rs 13.7 lakh crore. These are very good prospects for IRFC, which has financed around 48% of Railways’ capex in FY20.

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