The shares of Indian Railway Finance Corporation (IRFC) made a tepid debut on the bourses. The IRFC stock listed at Rs 25, a 4 per cent discount on BSE to its issue price of Rs 26 per share. On the NSE, it listed at Rs 24.90 per share.
Over 6.45 crore IRFC shares were traded, and the stock closed at Rs 24.85 and at Rs 24.80 on the BSE and NSE respectively. Its market capitalisation stood at Rs 32,410 crore at the end of the trading session on Friday.
IRFC is a dedicated finance arm of the Indian Railways and mobilises funds from domestic and overseas markets. Its primary objective is to meet a predominant portion of 'extra-budgetary resource requirement of the Indian Railways through market borrowings.
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The company's business recorded strong growth on the back of increased investment by the Indian Railways after 2014-15 as the NDA government accelerated infrastructure spending on Railways.
A comparison of IRFC with peers indicate that its return on equity (ROE) is marginally lower. However, Nirmal Bang Securities, a brokerage firm, said that the lower ROE was compensated by higher growth. Its valuation appeared to be higher than peers.
IRFC posted a 20.7 per cent compound annual growth rate (CAGR) in operating income in the last two years while net profit grew at a CAGR of 26.3 per cent during the same period. The company is unlikely to face any asset quality issues as it caters to the government.
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"At the higher end of the price band, the stock would be trading at Price-To-Book Ratio (P/B) of 1.0x fully diluted post issue book value of Rs 26.6 per share. We expect the company to post strong growth driven by capex of Indian Railways along with stable margins due to its cost-plus model," Angel Broking said in its IPO note.
