RailTel makes muted stock market listing; gains 11% over IPO price to trade at Rs 104.6 apiece

RailTel’s equity shares listed on the stock exchanges today with a marginal premium over the IPO price as benchmark indices tanked owing to a global sell-off. RailTel stocks were quoting a price of Rs 104.6 per share, up 11.28% from its issue price of Rs 93-94 per share. RailTel is a PSU information and communications technology infrastructure provider with one of the largest neutral telecom infrastructure providers in the country. This will be the second Ministry of Railway subsidiary to list on the bourses in 2021, after Indian Railway Finance Corporation. Minutes into the training session, shares of RailTel gained further to trade at Rs 111.

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The state-owned firm is Mini Ratna (category-1), which indicates that RailTel has managed to report profits for the last three consecutive years. As of January 31, 2021, the company had the exclusive right of way along 67,415 route kilometre connecting 7,321 railway stations for laying optical fibre cable. “RailTel serves as a key network for the Indian Railways. It provides a variety of services to the Indian Railways and has implemented MPLS data network for integrated payroll and accounting system, unreserved ticketing system, freight operations information system and coaching operations information systems,” said analysts at Religare Broking in a note. 

RailTel intends to create small cell and tower infrastructure at railway stations for hosting telecom players to assist with their preparation for the 5G network. Its portfolio of services includes MPLS-VPN, leased lines services, TPaaS, eOffice services and data centre services, large network hardware system integration, software and digital services. 

Financially, the company has reported a growth in net profit from Rs 134 crore in the financial year 2018 to Rs 141.1 crore in the previous fiscal year. EBITDA Margins have gone from 27% in FY18 to 29.6% in FY20. Analysts at ICICI Direct had valued the firm at 21.4x FY20 price/EPS on the upper end of the issue price. Choice Broking valued RailTel at FY20 P/E multiple of 15.8x (to its restated EPS of Rs. 5.9) on the higher end of the price band, while said the price band translated to P/E ratio of 21.36X.