State-owned engineering consultancy RITES Ltd IPO intends to raise ₹466.2 crore through an OFS (Offer for sale). RITES Limited IPO opens on June 20 and closes on 22 June. The company has set a price band of ₹180-185 per share. The IPO is a pure offer for sale by the government, which is selling a 12% stake in the company.
RITES Limited IPO: Details
|Issue Period||Wed June 20 – Fri, June 22, 2018|
|Issue Size||OFS of 25,200,000 Shares|
|Issue Size (Rs. Cr)||Rs. ~460 Cr|
|Price Band||Rs.180 – 185|
|Retail & Employee Discount||Rs.6/- per Share|
|Bid Lot||80 Equity Shares & multiples|
|Issue Structure :|
|QIB||50% of the Net offer|
|NIB||15% of the Net offer|
|Retail||35% of the offer- 8,400,000 Shares-150.36 Cr|
|Lead Managers||Elara Capital, IDBI Capital, IDFC Bank, SBI Capital Market|
About RITES Limited
- RITES Limited is a wholly owned Government Company, under ministry of Railways. RITES was incorporated in 1973 and is a Miniratna (Category – I) Schedule ‘A’ Public Sector Enterprise.
- Based on Public Enterprise Survey 2015-2016, RITES is ranked no. 1 based on net profit and dividend declared in Industrial Development and Technical Consultancy Services sector.
- RITES has an experience spanning 43 years and has undertaken projects in over 55 countries including Asia, Africa, Latin America, South America and Middle East regions.
- RITES is the only export arm of Indian Railways for providing rolling stock overseas (other than Thailand, Malaysia and Indonesia)
- RITES has been appointed by the Government of Mauritius as a consultant for implementing light rail project in Mauritius and also to prepare a detailed project report on Trident port project.
- RITES Limited is also working on projects in Nepal, Africa, Sri Lanka ,Guyana (South America).
- As of March 31, 2018, RITES has a total of 3,349 employees.
RITES Limited: Financials
|Figs in Rs. Crore|
|Revenue from Operations Gr||936.15||1,353.36||1,090.53||1,012.69||1,096.49|
|Revenue Growth (%)||–||24.10%||7.69%||-7.64%|
|Profit Before Tax||289.3||507.14||450.62||468.24||391.61|
|Net Profit Margin||26.98%||26.72%||25.91%||30.83%||30.83%|
|Equity Share Capital||200||200||100||100|
|Net Asset Value (Rs.)||108.6||102.06||186.35||167.62|
|PE (Annualized FY18)||11.42|
|PE – (FY17)||10.49|
|CAGR Sales 3 Yrs||7.27%|
|CAGR Net Profit 3 Yrs||11.16%|
|Market cap / Sales||2.73|
RITES Limited IPO: Pros
- RITES is a leading player in the Transport Consultancy and Engineering sector in India.
- RITES Limited has diversified services and geographical reach in this field under one roof.
- RITES Limited current order book is about Rs. 4800 crore with 53% of orders for consultancy services, 29% for Turnkey projects, 15% for exports and rest for leasing and power generation.
- Out of these projects, at the end of FY18, RITES Limited 76.79% of the total orders in hand amounting to Rs. 3700 crore are on nomination basis from MoR, central/state governments and central/state PSUs.
- This order book includes 353 ongoing projects of value over Rs.1 crore each indicating considerable spread of orders.
- Over FY16-18, RITES Limited order book has shown a healthy uptick growing by 35.8% CAGR to Rs. 4800 crore in FY18.
- RITES is a Debt Free company for more than a decade.
- RITES has a significant presence as a transport infrastructure consultancy organization in the railway sector. Besides this it also provides consultancy services across other infrastructure and energy market sectors like urban transport, roads and highways, ports, inland waterways, airports, institutional buildings, ropeways, power procurement and renewable energy.
- Substantial revenues accrues from sale of services and a diversified The multidisciplinary engineering and consultancy organization provides a diversified and comprehensive array of services from conceptualizing to commissioning all the facets of transport infrastructure and related technologies under one roof.
RITES Limited IPO: Risks
- RITES Limited is dependent on MoR (Ministry of Railways) for a significant portion of its business
- Market response to Government owned companies in past has been lackluster.
- Risk from Change in government policies and lower allocation for Railways
- Higher employee cost and less flexibility to attract talent due to Govt control
- The Ministry of Railway (MoR) has distributed the jurisdiction of work between RITES and IRCON International Ltd. (a peer group PSU under the MoR) in accordance with their respective core competencies. The company is permitted to participate in EPC or BOT contracts, other than railway contracts, in the event there is no conflict of interest with any other public sector undertaking under the MoR.
RITES Limited IPO: Assessment
- RITES was incorporated by the Ministry of Railways, Government of India and has the benefit of being associated with the Indian Railways, which is the fourth longest rail network in the world
- RITES Ltd. is a debt free company and follows an asset light model.
- Its growth in revenue and profitability has been consistent over the last few years. RITES Limited has posted growth of CARG 15.62% in top line and CAGR 7.73% in PAT for last three fiscals (FY15 – FY17) on a consolidated basis.
- The company’s order book is strong giving good revenue visibility. Further these constitute 353 ongoing projects of value over Rs.1 crore each and are geographically distributed. Further Consultancy and leasing services which have EBITDA Margins of 28% plus form 53% of its order book.
- RITES Limited has witnessed healthy growth in Order Book in last three Fiscals.
- At post issue P/E of around 10.5, the company’s valuations are reasonable. With a lower retail issue size of Rs. 150 crore, the IPO should be subscribed unlike some past issues by Govt. owned enterprises.
- Despite a lackluster performance by recent Govt controlled IPOs like GIC Re, HAL, BDL etc. whose IPO are ruling below IPO price,my stance on RITES Limited IPO is Positive. I intend to apply in the IPO, but will also keep a watch on response to the IPO on first 2 days.