RailTel makes a decent debut — shares list on bourses at 16% premium

• The shares of RailTel listed at about 16% higher at ₹109 apiece, compared to the IPO issue price of ₹93-94 per share.
• Within minutes after listing, the shares of RailTel gained 7% of their value and were trading at ₹111.7 apiece at 10:05 am in an otherwise tepid market.
• The listing is also in line with analysts expectations — which predicted listing gains above 15%.
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The ₹819 crore ($112 million) initial public offering (IPO) of state-run RailTel Corp made a decent debut after a tremendous investor response. The shares of RailTel listed at about 16% higher at ₹109 apiece, compared to the IPO issue price of ₹93-94 per share.

Within minutes after listing, the shares of RailTel gained 7% of their value and were trading at ₹111.7 apiece at 10:05 am in an otherwise tepid market. The company's market value expanded to ₹3,669 crore after the listing.

RailTel is a government-owned information and communications technology (ICT) infrastructure provider firm and India's largest neutral telecom infrastructure provider. Nearly all the brokerages have given a ‘subscribe’ rating for the issue, citing long term as well as listing gains. According to investment experts, the best thing is the company’s exclusive right to generate additional revenues by creating nationwide broadband and multimedia networks by laying optical fibre cable along railway tracks.

The IPO was subscribed 42 times and generated bids worth more than ₹259.42 crore against the offer size of 6.12 crore shares. The portion of the IPO reserved for retail investors was subscribed 16.78 times, whereas the qualified institutional buyer was subscribed 65.29 times.

Grey market premium fizzled out ahead of the listing

Although the high number of subscriptions showed an excellent demand for its shares, just days ahead of the listing, the company's grey market premium fizzled nearly 62%, amid the high market volatility this week.

The shares that were earlier commanding a premium of ₹35-40 were significantly down to ₹10-15 a share.

The listing is also in line with analysts expectations — which predicted listing gains above 15%.

“We expect RailTel Corporation to list at a premium of around 15% above the issue price. Company has priced its issue at 21.4x PE on a FY20 trailing basis, which is quite reasonable by looking at the strong future growth rates of the company,” said Keshav Lahoti, Associate Equity Analyst at Angel Broking. The price-to-earnings (P/E) ratio shows the price that the market is willing to pay for a stock based on its earnings. Higher the P/E, the more expensive the stock.

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