Taking into account FY18 annualised earnings, the issue is commanding a price to earnings multiple of 11.4 times.
ET Intelligence Group: Investors may consider subscribing to the Initial Public Offering (IPO) of stateowned Rail India Technical and Economic Services (RITES), which offers diversified services in the infrastructure sector. A debt-free balance sheet, an order book of more than Rs 4,800 crore that gives revenue visibility for the next two-three years, reasonably good financial performance, and a steady dividend paying record together work in favour of the company.
BUSINESS MODEL RITES is a Miniratna public sector undertaking (PSU). Broadly, the businesses can be divided into four revenue streams. First, it provides design, engineering and consultancy services in transport infrastructure such as railways, roads, bridges, highways, and ports. Second, RITES is into leasing, export, maintenance, and rehabilitation of locomotives. Third, it runs turnkey projects on engineering procurement construction (EPC) basis, largely related to railways and construction of institutional, residential and commercial buildings. Fourth, it is into the manufacturing of wagons, renewable energy generation and power procurement for Indian Railways through joint venture arrangements, subsidiaries or consortium arrangements.
As of FY17, RITES derives 49 per cent of revenue from consultancy services, 28 per cent from export sales (sale of locomotives and taking turnkey and other construction projects), and the remaining comes from other businesses. As of March 2018, the company had an order book of Rs 4,819 crore, which provides revenue visibility of more than two years for the company.
Of the total current order book, more than 70 per cent of the orders are from central and state governments. The company has also undertaken projects in 55 countries, including in the Asian, African, Latin American, and the Middle East regions. It has a strong client base and mainly caters to the Indian Railways. The high investment budget of the railways works in favour of the company. The IPO consists of an offer for sale of 2.52 crore (amounting to 12.6 per cent stake) shares by the government.
FINANCIALS In the past four years ending FY17, the company’s revenues have grown at a compounded annual growth rate (CAGR) of 9 per cent to Rs 1,353 crore. Also, its net profit has grown at a CAGR of 11 per cent to Rs 362 crore in FY17.
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VALUATION Taking into account FY18 annualised earnings, the issue is commanding a price to earnings multiple of 11.4 times. In comparison with companies that have a similar business model such as NBCC and Engineers India, which have been trading at PE multiples of 48.3 and 26.7 respectively, the company’s valuation looks attractive.
RITES IPO: All you need to know about the issue
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India's divestment juggernaut is starting to move, with the high-decibel RITES listing. The Rs 466-crore IPO (initial public offering) kicks off on Wednesday.
First to get off the block this financial year, RITES (Rail India Technical and Economic Services) promises much. Being a state-owned entity, will it deliver?
We have a fine print ready for you.
India's divestment juggernaut is starting to move, with the high-decibel RITES listing. The Rs 466-crore IPO (initial public offering) kicks off on Wednesday.
First to get off the block this financi..
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That's a follow-up to Finance Minister Arun Jaitley's 2017 announcement of Indian Railways’ plans to list its subsidiaries after the merger of the railway budget with the Union budget. Rail Vikas Nigam (RVNL), Indian Railway Finance and IRCON International may follow suit.
That's a follow-up to Finance Minister Arun Jaitley's 2017 announcement of Indian Railways’ plans to list its subsidiaries after the merger of the railway budget with the Union budget. Rail Vikas Nig..
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With this public offer, the government looks to offload 12.6 per cent of stake in the company.
With this public offer, the government looks to offload 12.6 per cent of stake in the company.
The price band has been set at Rs 180-185 per share with face value of Rs 10 each. There's no fresh issue of shares, but OFS (offer for sale) of 2.52 crore shares.
On top of that, 12 lakh shares are reserved for eligible employees. At the upper price band of the offer, the company aims to raise Rs 466.2 crore.
The price band has been set at Rs 180-185 per share with face value of Rs 10 each. There's no fresh issue of shares, but OFS (offer for sale) of 2.52 crore shares.
On top of that, 12 lakh shares are..
Read More
Promoter's holding of 100 per cent in the company will come down to 87.4 per cent, post IPO. Public holding will rise to 12.6 per cent from nil. Shares will be listed on both the NSE and the BSE.
Promoter's holding of 100 per cent in the company will come down to 87.4 per cent, post IPO. Public holding will rise to 12.6 per cent from nil. Shares will be listed on both the NSE and the BSE.
The three-day issue closes on June 22, that's Friday.
The three-day issue closes on June 22, that's Friday.
One, overdependence on the government for its future contracts. That makes the game a little dicey.
Two, competition is on the rise -- both from existing players as well as new entrants. Three, long execution of contracts is another drag.
One, overdependence on the government for its future contracts. That makes the game a little dicey.
Two, competition is on the rise -- both from existing players as well as new entrants. Three, long..
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Its consultancy service offering covers mostly everything, mainly in transport infrastructure. That means additional business opportunities from existing and new clients.
A positive side-effect is forging of long-term relationships with clients in India and abroad as well.
It has specialised expertise to talk about when it comes to providing consultancy services in transport infrastructure such as railways, urban transport, roads and highways, ports, inland waterways, airports and ropeways.
Its diversified portfolio is another plus.
Its consultancy service offering covers mostly everything, mainly in transport infrastructure. That means additional business opportunities from existing and new clients.
A positive side-effect is f..
Read More
That's something the government will be seriously hoping for. A good show by RITES in all probability will open the floodgates for many more.
There's a lot at stake. For 2018-19, the government has set a divestment target of Rs 80,000 crore. That's a big number, to start with.
That's something the government will be seriously hoping for. A good show by RITES in all probability will open the floodgates for many more.
There's a lot at stake. For 2018-19, the government has ..
