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The IPO of state-owned infrastructure consultancy, RITES, established in 1974 under the umbrella of Indian Railways, that is set to hit the market on June 20, may set the stage for further divestment in the railway sector.
RITES’ IPO through which the government is selling 12 per cent stake in the company, or 2.52 crore equity shares, which also includes 12 lakh shares reserved for employees, could fetch the government up to ₹460 crore. The price band for the issue is fixed at ₹180-185 a share. The IPO will open for bids on June 20 and close on June 22, the company said.
In the last Union Budget, the government had announced a disinvestment target of ₹80,000 crore for FY19, adding that the actual amount may cross the ₹1 lakh crore mark.
In the railway sector alone, the government has been mulling divesting its stake in several others, such as Rail Vikas Nigam (RVNL), IRCON International, Indian Railway Finance Corporation (IRFC) and Indian Railway Catering and Tourism Corporation (IRCTC). The IPOs of IRFC and IRCTC, however, are believed to be temporarily shelved as the government is exploring more opportunities for realising their value.
The initial idea was to divest 5-10 per cent in the railway PSUs through IPOs and then bring down the government stake gradually up to the 75 per cent mark — in line with SEBI guidelines.
RVNL, an extender arm of Indian Railways for fast-track implementation of capacity augmentation works and other priority projects related to rail infrastructure, has received the green signal from SEBI to float an IPO that could raise around ₹500 crore, in May. Through this issue, the government would divest 10 per cent holding in the PSU.
RITES at large
RITES has, over the years, expanded its consultancy services from the railway space to broader transport infrastructure that includes highways, metros, airports and other areas. The consulting services contribute 61 per cent of company’s revenue that stood at ₹1,509 crore in FY17. The company’s order book stands at ₹4,800 crore.
Apart from consulting and other allied businesses, RITES has also ventured into energy management and power procurement. It purchases power, both from open access market and from renewable energy projects. It has also moved into rooftop installations at railway stations and grid-connected solar parks.
The company has completed power purchase of 475 MW out of 2,000 MW contracted by Indian Railways. The rest should be completed within next couple of years, Rajeev Mehrotra, Chairman and MD, RITES, said. The company is also in talk for procuring renewable energy of up to 400 MW from a solar park in Madhya Pradesh, he added.
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