RailTel Corporation of India Limited IPO (RailTel IPO) Review

Overview of the Company:

  • The Company was incorporated on 26th September 2000

  • The Promoter of the Company is the President of India acting through Ministry of Railways (MoR)

  • RailTel is an Information and Communications Technology (ICT) infrastructure provider.
  • It is One of the Largest Neutral Telecom infrastructure providers in India (Source: CRISIL Report). Their network of optical fiber is spread in all over India
  • The Company is Mini Ratna (Category I) Central Public Sector Enterprise, wholly owned by the Government of India and under administrative control of the Ministry of Railways
  • The Aim of the Company is to Modernizing the existing telecom system for train control, operation and safety

  • As on 30th June 2020, the company had Exclusive Right of Way along 67,415 route kilometers connecting 7,321 Railway Stations for laying optical fiber cable. The company have 59,098 route kilometers of optical fiber cable connected to 5,929 railway stations across towns and cities in India as of 30th June 2020.

 

 Business Models of the Company:

The Company Mainly Operates in the below mentioned major sectors:

  1. Telecom Network Services
  2. Telecom Infrastructure
  3. Managed Data Center & Hosting Services
  4. Projects (System Integration Services)
The following is the revenue breakup and the revenue share of each of the above mentioned business model:

Product and Services

Revenue (₹ in Lakhs)

Revenue Share (%)

Telecom Network Services

58,129

51.5%

Telecom Infrastructure

13,516

11.99%

Managed Data Center & Hosting Services

2,830

2.52%

Projects (System Integration Services)

38,331

33.99%

TOTAL

1,12,806

100%

Positive Aspects of the Company:

  • RailTel is the First Choice of Indian Railways for all the Network related requirements.
  • The Industry in which company is is growing very rapidly, Enterprise data services demand is growing regularly.
  • The Company has Negligible Debt.

Negative Aspects of the Company:

  • The Financials of the company for Long term prospective is very sluggish.
  • The Company is facing a big competition in the sector in which it operates and has major revenue from the Big Competitor namely Reliance Jio.
  • If Company wants to grow then it will have to focus on private sector as well.
  • The Company has the following Outstanding Litigations:

Type of Proceeding

Number of Cases

Amount Involved (Quantifiable ₹ in Lakhs)

Civil (Material)

1

582.90

Criminal

2

157.00

Regulatory / Statutory Action

-

-

Tax

14

3,223.00


Details about the Valuations:

 

FY 2021

FY 2020

Price to Earnings Ratio

33.10

21.36

Price to Book Value Ratio

2.16

2.20

The Company's Expected CAGR is around 11-13%

GMP as on date is 25%. We can Expect a Listing Gain of around ₹2,500 to ₹5,000/-


SWOT Analysis of the Company:

Strengths (S)

  • The Company has Exclusive Right of way
  • It Provides Diversified Services
  • The Company is the Key Partner in Indian Railways
  • It is one of the Profitable Telecom Partner
  • The Company has No Debts
  • Extensive Execution Experience of ICT Projects (Information Communication and Telecom Projects)

 Weakness (W)

  • The Business of Company is very Concentrated i.e it is limited to only Public Sector Undertakings (PSUs)
  • There is a huge overdependence on the Government Policies
  • The Company Faces the issues of High Trade Receivables days. It receives the payment after around 164 days.

 Opportunities (O)

  • The new 5G Roll-Out can turn into a big opportunity for the company.
  • There is an Increasing stress on Digitalization by Government which can turn out as an Opportunity.
  • Company can Expand their Existing Network.
  • Further Diversification of Services and Solutions.

 Threats (T)

  • Fierce Competition
  • Continuous Technological Advancement in the Industry can cause a threat for the company as it will require the company to adapt with the new technology.

 

IPO Details:

IPO Opening Date

Feb 16, 2021

IPO Closing Date

Feb 18, 2021

Issue Type

Book Built Issue IPO

Face Value

₹10 per equity share

IPO Price

₹93 to ₹94 per equity share

Market Lot

155 Shares

Min Order Quantity

155 Shares

Listing At

BSE, NSE

Issue Size

87,153,369 Eq Shares of ₹10

(aggregating up to ₹819.24 Cr)

Offer for Sale

87,153,369 Eq Shares of ₹10

(aggregating up to ₹819.24 Cr)
    

RailTel IPO Tentative Timetable

IPO Open Date

Feb 16, 2021

IPO Close Date

Feb 18, 2021

Basis of Allotment Date

Feb 23, 2021

Initiation of Refunds

Feb 24, 2021

Credit of Shares to Demat Account

Feb 24, 2021

IPO Listing Date

Feb 26, 2021

RailTel IPO Lot Size

The RailTel IPO market lot size is 155 shares. A retail-individual investor can apply for up to 13 lots (2015 shares or ₹189,410).

Application

Lots

Shares

Amount (Cut-off)

Minimum

1

155

₹14,570

Maximum

13

2015

₹189,410

Conclusion

This IPO Not Good for Long term Prospective, but one can take it into consideration for short term prospective or for Listing gain point of view because has a very good GMP.


This are my personal views, all the equity investments are subject to market risk. Please read all offer documents before investing. This blog is only for information and education purposes. Please consult your investment adviser before investing.

Thank You for Reading this Article


To Read My Article on Basics of Initial Public Offer (IPO). Do Visit the Following Link: 

https://www.yourcaguide.com/2019/11/basics-of-initial-public-offer-ipo.html


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