There is a chance for investors to invest money in the financing stock of Railways. IRFC’s offer for sale is open at the base price of Rs 104. The total issue size from the sale of this 4% stake is about Rs 5,436 crore. The central government has proposed to sell 2% stake in IRFC and has also offered to sell additional 2% shares under the green shoe option. More than 26.13 crore shares are to be sold under OFS, and if the demand is high then there is an option to sell the same number of additional shares.
The government will not exercise the option to sell additional shares in the existing IRFC OFS, as the issue was not fully subscribed on the first day. This issue was opened for large investors on Wednesday, where only about 95% (0.95 times) of the 2% stake was purchased.
Should retail investors participate?
Ravi Singh, Chief Research Officer, Master Capital Services, says that due to OFS the supply of shares in the market will increase. However, he said that IRFC is a fundamentally strong company. It benefits from government support, stable income and a key role in financing railway infrastructure projects.
When asked whether investors should invest in OFS now or wait for clarity after the stake sale, he said that right time and right price are very important. Currently, IRFC is trading at a cheaper level compared to its old valuation. Good growth in the company’s loan book and increasing government expenditure on railways are supporting its shares.
Usually the price of OFS is kept below the market price, due to which investors get an opportunity to buy cheaply. People who invest cautiously can wait for the OFS to end and the price to stabilise. Investors who can handle short-term fluctuations can consider taking advantage of lower prices during OFS. Overall, the stake sale is unlikely to have a major impact on IRFC’s long-term business, but investors may take this opportunity to re-evaluate their investment strategy.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money related decisions.