IRFC shares fall 6% on govt stake sale buzz

Shares of state-owned Indian Railway Finance Corp (IRFC) tumbled nearly 6% on Thursday after media reports suggested the government is planning to sell a part of its stake in the company through an offer for sale (OFS) in the current fiscal. The government currently holds 86.36% shareholding in the financing arm of the Indian Railways.

Reacting to the news, IRFC shares declined as much as 5.66% to ₹48.29 on the BSE, while the market capitalisation dropped to ₹63,774 crore. Early today, the PSU stock opened lower at ₹50, against the previous closing level of ₹51.19, snapping two sessions gaining streak.

The railway stock touched a 52-week high of ₹52.71 in the previous session amid strong rally in the recent past. The counter has surged around 50% in the past 12 sessions from ₹35.06 on July 28, 2023.  

IRFC share price has risen more than 140% against its 52-week low of ₹20.55 touched on September 26, 2022. In the last one year, the stock has turned multibagger, delivering 128% returns to its shareholders during the same period. The counter has risen 48% in the calendar year 2023; 69% in six months; and 50% in a month.

As per report, an inter-ministerial group (IMG) comprising senior officers from the Department of Investment and Public Asset Management (DIPAM) and the Railways Ministry has begun consultations to decide on the quantum of stake sale.

In a bid to meet SEBI’s minimum public shareholding (MPS) norm, the government has to dilute 11.36% shareholding in the company. As per MPS norm, a listed firm has to maintain a minimum public float of 25% within five years of listing. IRFC shares were listed on the domestic stock exchanges in January 2021. 

At Wednesday's closing price of IRFC shares, a sale of 11.36% would fetch the government around ₹7,600 crore.

Last week, IRFC, the dedicated market borrowing arm of the Indian Railways, released its June quarter earnings report that showed that its net profit dropped 6.3% year-on-year (YoY) to ₹1,556.6 crore as compared to ₹1,661.6 crore in the year-ago period. Sequentially, net profit was up 17.2% from ₹1,327.7 crore in Q4FY23.

The revenue from operations rose 18.7% YoY to ₹6,679.2 crore while total income stood at ₹6,681.0 crore during the quarter under review.

Net worth and Assets Under Management (AUM) at the end of Q1 FY24 stood at ₹47,034 crore and ₹4,66,251 crore, respectively. The earnings per share of the Company was at ₹1.20 in Q1 FY24 as compared to ₹1.27 in Q1 FY23.

On July 27, 2023, the miniratna public sector enterprise signed a memorandum of understanding (MoU) with RITES to strengthen cooperation in the financing and development of railway infrastructure projects. The MoU aims for identifying mutual areas of collaboration for expanding IRFC’s role in providing financial assistance to projects/institutions that have got backward and or forward linkages with Railways and by RITES providing assistance to IRFC in ascertaining the financial & technical viability of projects, providing advisory & consultancy services, the company said in an exchange filing.

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