RailTel Corporation share lists at Rs 109, a 16% premium over IPO price

RailTel Corporation

State-owned RailTel Corporation of India share price started off the first trade with a massive 15.96 percent premium on February 26. The stock opened at Rs 109 on the National Stock Exchange, against its issue price of Rs 94.

On the BSE, the share climbed 11.28 percent to Rs 104.60 in the opening. The listing was on expected lines as analysts had expected RailTel to list with 10-20 percent premium.

At 10:02 hours IST, RailTel Corporation shares extended gains to trade at Rs
111.50 on the BSE, up 18.62 percent with volume 22.19 lakh equity shares.

It was quoting at Rs 113.55 on the National Stock Exchange, rising 20.8 percent with volume of over 2.48 crore shares.

RailTel Corporation was the seventh listing in 2021 after Indian Railway Finance Corporation, Indigo Paints, Home First Finance Company, Stove Kraft, Brookfield India REIT and Nureca.

The company has garnered around Rs 819 crore through its public issue which was a complete offer for sale and a part of divestment programme FY21. Hence, all the money received by the Government of India.

RailTel is one of the largest neutral telecom infrastructure providers in India. As of January 2021, it had an exclusive right of way along 67,415 route kilometers connecting 7,321 railway stations for laying optical fiber cable (OFC). The company has 59,098 route kilometers of OFC network, connecting 5,929 railway stations across towns and cities in India.

It also has city wide access network of over 18,000 kilometers and offers high capacity bandwidth of up to 800G at 87 locations in India. The company also offers leased line and VPN facilities and also provide IP-1 services.

“The company is going to play a key role in digital transformation of Indian Railways. Company’s margins & return ratios are better compared to other telecom players in India. The company also has a strong financial position (debt free) and has been consistently paying dividends since 2008,” Keshav Lahoti, Associate Equity Analyst at Angel Broking told Moneycontrol.

“There are no listed peers for the company. RailTel had priced its issue at 21.4x PE on a FY20 trailing basis, which is quite reasonable by looking at the strong future growth rates of the company,” he said.

The company has also entered into agreements with telecom companies and multiple system operators (MSO) to lease bandwidth and offer last mile optical fiber cable network connectivity across cities and towns in India.

RailTel has reported a 7.5 percent CAGR rise in topline in FY20. Total operating expenditure increased by 5.6 percent CAGR (a rate lower than topline growth) over FY18-20, thereby leading to a 12.4 percent CAGR rise in EBITDA in FY20. EBITDA margin expanded from 27 percent in FY18 to 29.6 percent in FY20. Adjusted PAT increased by 8.9 percent CAGR over FY18-20. Its average RoIC and RoE stood at 8.6 percent and 10.6 percent, respectively, over FY18-20.

RailTel is profitable since FY07 and paid dividend since FY08. Average dividend payout stood at around 40 percent over FY18-20.

“Based on our quick estimate, topline is likely to increase by 4 percent CAGR over FY20-23 to be at Rs 1,269.97 crore in FY23. EBITDA and PAT margin are forecasted to expand by 178bps and 26bps, respectively, during the period to stand at 31.4 percent and 17.1 percent in FY23 as compared to respective margins of 29.6 percent and 16.9 percent in FY20,” Choice Broking said.

Considering the futuristic service & growth plans of the IR and RailTel’s ability to monetize its existing assets through subscription plans and co-sharing with private operators, we feel that fundamentals are positive for the company,” the brokerage added.

News Source:- MoneyControl

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