The Centre announced OFS in RVNL, a prominent PSU and construction arm of Railways, on July 26.

The government is selling 70,890,683 equity shares which is 3.4 per cent of the total paid-up equity with a greenshoe option of 1.96 per cent of paid-up capital. This adds up to 5.36 per cent of total paid-up capital (around 11 crore shares). Post this issue, the government holding in the company will be 72.8 per cent. The floor price is set at ₹119 which is at 6 per cent discount from current market price and the stock corrected 6 per cent today (July 27 ) to ₹126.15. The issue was open for non-retail investors today and for retail investors tomorrow (July 28).

Although the floor price is set at a discount to current market price, investors need not rush to subscribe the issue as current valuation appears to factor the company’s good prospects. Investors may wait for now and look for better entry point at lower levels.

The trailing PE of the company is 18.5 times whereas the historical 4-year trailing PE (since listing in 2019) is 7.2, and the trailing EV/EBITDA is 24.4 times against its 4-year average of 9.75 times.  

In our bl.portfolio edition dated February 26, we had recommended to accumulate the stock at dips when the market price was ₹63.1. Post a 106 per cent rally from this level on May 4, we recommended to partially book profit at ₹129.35. Our recommendation was based purely on valuation although the business prospects remain good for the company, and we maintain our view. The stock can be considered for accumulation at lower multiples.

Recent performance

The ongoing infrastructure theme due to the government focus on capex is a good tailwind for the company. The order inflow the company from April 1, 2023 till date is around ₹5,280 crore and the book to bill ratio is 3.02 times.. The most recent and prominent orders of the company are — construction of five underground stations for Chennai Metro Rail worth ₹1,730.59 crore, and rehabilitation and upgradation of Chandikhole – Paradip Section of NH-53 worth ₹808.48 crore.

The company reported a revenue growth of 5 per cent to ₹20,281 crore in FY23 over FY22. The EBITDA grew 6.2 per cent to ₹1,267 crore in FY23 and net profit grew 7 per cent to ₹1,420 crore in the same period. The EBITDA margin remained flat at 6.2 per cent for both FY22 and FY23, the EPS growth for FY23 was 20 per cent at ₹6.81 per share.