Our Bureau Rail Vikas Nigam (RVNL), which seeks to sell shares through an initial public offering, is a unique public sector undertaking.

The Ministry of Railways (MoR), which controls RVNL, “assigns” projects such as laying new lines, doubling, gauge conversion, railway electrification, metro projects, and workshops, among others, to the PSU for implementation. RVNL’s order book mostly comprises such orders given on “nomination” by the Railway Ministry.

For the work, RVNL is paid a consolidated management fee by the Railway Ministry on the annual expenses incurred for the execution of projects — 9.25 per cent for metro projects, 8.5 per cent for other plan heads, and 10 per cent for national projects. The management fee is the only operational income for the company that was set up in 2003.

The rail infrastructure developer is a debt-free company, a privilege also born out of its lineage. Borrowings are a pass-through entry on its books wherein interest and principal repayments are borne by the Railway Ministry. Projects are funded through loans from the Indian Railway Finance Corporation (IRFC), the in-house financier of the Ministry.

RVNL enjoys a moratorium of three years on repayment of each year’s loan. During this period, it is not required to pay interest and principal. The Railway Ministry takes “full responsibility” for debt servicing of RVNL, which only passes through RVNL’s books.

Funds received by RVNL from the Railway Ministry every year for debt servicing are immediately transferred to IRFC.

Asset-light model biz

RVNL works on the asset-light model. In their contracts, RVNL requires the contractor to provide all the machinery, plants and stores for execution of works.

RVNL, a mini-ratna PSU, has set a price band of ₹17-19 a share for the IPO which will open on March 29 and close on April 3. The proceeds from the IPO will fully go to the government’s disinvestment corpus.

It will be the third rail PSU to be listed after RITES and IRCON.

comment COMMENT NOW