RITES, the wholly owned government company is set to hit the market with its Rs 446 crore IPO on Wednesday. The government intends to dilute 12.6 percent of its stake in the company with this offer. It is the first state-owned company IPO this financial year, as the government plans to raise Rs 80,000 crore from PSU (Publis Sector Unit) disinvestment.
About the company
RITES (Rail India Technical and Economic Service) is an engineering consultancy in the field of transport infrastructure, established in 1974.
It was awarded the Miniratna (Category I) status in 2002. The company has diversified service and geographical experience handling projects in over 55 countries in Asia, Africa, Latin America and South America.
Price band: Rs 180 to 185
Face value: Rs 10
Minimum lot size: 80 shares
Offer period: 20 to 22 June
To be listed on: NSE and BSE
Issue managers: Elara Capital India, IDBI Capital Markets & Securities, SBI Capital Markets and IDFC Bank.
Registrar: Link Intime India Private Ltd
The upper price band of Rs 185 will fetch Rs 460 crore to the government. There will be no fresh issue of shares, the government is selling 2.52 crore shares (12.6 percent of its stake) and this includes 12 lakh shares to eligible employees.
Retail investors and employees will be offered shares at the price of Rs 6 per share. QIB (qualified institutional buyers) will be allotted 50 percent of the offer, 35 percent for retail investors and the 15 percent for NIIs (non-institutional investors).
Should you invest?
If you look at the financials, RITES has maintained its profitability record for the last five years and has paid regular dividends to its shareholders.
Its stable financial position helps it to meet the minimum financial eligibility criteria to bid projects across market segments as per Angel Broking.
The company's total income has risen at a CAGR of 9.61 percent from Rs 1,083.05 crore in FY13 to Rs 1,563.27 crore in FY17, while its PAT has grown to Rs 361.66 crore at a CAGR of 11.61 percent from Rs 233.06 crore during the same period, the brokerage noted in its report.
Centrum Broking said in its IPO note that, "Given RITES competence along with a good track record, healthy financials and attractive valuations, we advise investors to subscribe to the issue."
The brokerage also pointed out that RITES has no listed peer and has good financials with EBITDA nearly 28 percent and RoE (return on equity) of over 16 percent. This means it is virtually debt free, dividend paying and has positive cash flow from operations.