IRFC IPO: Issue subscribed 3.42 times; QIB portion booked nearly 4 times; what should be listing day strategy?

The Rs 4,633-crore Indian Railway Finance Corporation (IRFC) initial public offer (IPO) has been subscribed 3.42 times on the final day of the three-day bidding process. According to the subscription data available on the exchanges, the issue received bids for 426 crore equity shares as against the offered size of over 1.24 crore equity shares. The portion set aside for qualified institutional buyers has received 3.78 times subscription while non-institutional investors have seen subscription of 2.66 times. Retail category saw 3.53 times application while the employees subscribed their reserved portion a massive 43.73 times. AR Ramachandran, Co-founder & Trainer, Tips2Trade, told The Outlooker Online that IRFC IPO has unexpectedly seen a very positive response due to strong subscription from the retail and QIB investors.

“With markets at all-time highs, allotted investors should book profits on a listing day and await a correction to add fresh buys at a later stage,” Ramachandran advised investors. Up to 35 per cent of the total issue size was reserved for retail investors, the quotas for qualified institutional bidders and non-individual investors were fixed at 50 per cent and 15 per cent, respectively. Most of the brokerages had recommended to ‘subscribe’ to the issue for the listing gains as the firm is the dedicated market borrowing arm of the Indian Railways.

Today, IRFC’s grey market premium fell to Rs 0.80-0.90 from Rs 1.3 yesterday. Through the initial public offer, the President of India, the promoter of IRFC, planned to offload 13.6 per cent stake in the company, bringing the promoter shareholding to 86.4 per cent post-issue. IRFC’s valuation stood at PB of 1x. Aditya Kondawar, Founder and COO, JST Investments told The Outlooker Online that the IPO may list with a small premium on the listing day given its Rs 1.2-1.3 grey market premium. “We gave an ‘avoid’ rating for the long-term due to the margins being decided by the Ministry of Railways and for the short term due to low grey market premium,” he added.