Rail Vikas Nigam

Rail Vikas Nigam IPO comprises IPO sale offer of up to 25,34,57,280 equity shares of the company through an offer for sale by the President of India, acting through the Ministry of Railways, Government of India. State-owned Rail Vikas Nigam Ltd (RVNL)  IPO is being offered in a price band of ₹17-19 per equity share which would run from March 29-April 3, to raise about ₹481 crore.

Rail Vikas Nigam IPO Details

Issue PeriodFri, Mar 29 – Wed, Apr 03 2019
OFS253,457,280 Equity Shares
Issue Size (Rs. Cr)Rs.477.11 Cr
Price BandRs.17 – 19
FVRs. 10
Bid Lot780 Shares 
Retail discountRs.0.50 per Share
Issue Structure :
QIB50% of Net offer
NIB15% of Net offer
Retail35% of Net offer- 88,480,000 Shares-Rs. 163.69 Cr
PaymentASBA Mandatory
BRLMsYes Securities, Elara Capital, IDBI Capital
RegistrarAlankit Assignments Ltd

About Rail Vikas Nigam Ltd.

  • Rail Vikas Nigam Limited (“RVNL”) is the wholly owned government company, a Miniratna (Category – I) Schedule ‘A’ Central Public Sector Enterprise, incorporated by the Ministry of Railways (“MoR”) on January 24, 2003.
  • Rail Vikas Nigam Ltd. (RVNL) is a primarily consultancy service providing company under the Railway Ministry of Government of India
  • RVNL is a Project Executing Agency working for and on behalf of MoR. It undertakes rail project development, mobilization of financial resources and implementation of rail projects pertaining to strengthening of golden quadrilateral and port connectivity and raising of extra- budgetary resources for project execution. RVNL is in the business of executing all types of railway projects including new lines, doubling, gauge conversion, railway electrification, metro projects, workshops, major bridges, construction of cable stayed bridges, institution buildings etc.
  • The projects undertaken by RVNL are spread all over the country and for efficient implementation of projects, 43 Project Implementation Units as on December 31, 2018 have been established at different locations.
  • To date, MoR has transferred 179 projects to RVNL, out of which 174 projects are sanctioned for execution and 72 projects have been fully completed amounting to Rs.20,567.28 crore
  • RVNL has an order book of Rs.77,504.28 crore as on December 31, 2018 which includes 102 ongoing projects.
  • Company’s major client is the Indian Railways. The other clients include various central and state government ministries, departments, and public sector undertakings.

Rail Vikas Nigam Ltd: Financials

Rs. In Crore
ParticularsHY19201820172016
Revenue3,622.887,597.365,915.114,539.85
Growth (%)28.44%30.29%
EBITDA 333.36713.53583.77526.76
EBITDA Margin (%) 9.20%9.39%9.87%11.60%
Profit Before Tax310.11664.03543.3498.97
Profit after Tax253.62569.92443.46429.43
NPM7.00%7.50%7.50%9.46%
Share Capital2,085.022,085.022,085.022,085.02
Reserves1,977.101,840.231,471.861,337.41
Net worth4,062.123,925.253,556.883,422.43
LT Borrowings1,963.352,259.152,436.882,624.08
RONW(%)6.24%^14.5212.47%12.55%
NAV (Rs.)19.4818.8317.0616.41
FV10
EPS (Rs.)1.222.732.132.06
IPO Price19
PE6.958.929.22
P/BV0.98
CAGR Revenues (3yr)34%
CAGR PAT (3 Yr)19%
Dividend (%)4.65%8.01%12.33%1.78%

Rail Vikas Nigam IPO : Assessment

  • On completion of f the Rail Vikas Nigam IPO, the government’s holding will drop to 87.84% Rail Vikas will have to bring down the government’s holding to 75% or below in three year times as per the minimum public shareholding norms for listed companies.
  • The Dividend yield at 4.2% is similar to that from other PSUs.
  • Rail Vikas Nigam Limited is majorly dependent on the MoR and any change in modalities of awarding order can have adverse consequences for the co. This dependence extends for manpower also as out of the total 550 employees on its payrolls, 389 are on deputation from Indian Railways.
  • in the review meeting of MoR dated November 21, 2018, Railway Board has been directed to reconsider the practice of giving railway projects/works on nomination basis and to consider giving projects/works to CPSUs through limited competitive tenders, as per the GFR guidelines on turnkey basis.
  • Two of its Group Company namely Bharuch Dahej Railway Company Limited and Krishnapatnam Railway Company Limited, were assigned CARE BBB+ and IND BBB- ratings for their long term bank facilities of ₹1,335.20 million and ₹9,330 million by CARE and India Ratings and Research in December, 2018 and April, 2018, respectively reflecting difficult financial position of these subsidiaries.
  • Rail Vikas follows an asset light model and even it manpower is on deputation from Railways.
  • PSU stocks have been commanding low premium. Most recent listings have bombed on the stock exchanges. The last MSTC IPO was extended by a week after poor response. Its listing is also not encouraging.
  • The stock is offered at a retail discount of Rs. 0.5
  • IRCON another company under the Rail ministry which came out with an IPO is ruling about same PE on TTM basis & has a lower dividend yield than Rail Vikas Nigam Limited.. The two companies are not strictly comparable.
  • First half profits ate muted but in PSU’s generally 2nd half is better.
  • Some scattered dealing has been reported in the issue in Grey Market for Rail Vikas Nigam IPO in the beginning. Now it is likely that share is commanding a small Kostak of Rs. 250 per application
  • The issue appears priced reasonably at P/BV ratio less than 1 & PE of 6.7 , reasonable divided yield , good orders in hand, the risk reward is balanced. I will keep watch on the IPO though I have a poor perception of PSU IPOs and the unfavorable risk-reward in CPSE IPOs. A reasonable interest from Mutual funds and QIBs if materializes will help to negate general -ve perception about PSU IPOs.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.