Govt gears up to list IRFC, IRCTC by January

The government is gearing up to list Indian Railway Finance Corporation (IRFC) and Indian Railway Catering and Tourism Corporation (IRCTC) by November 2017 and January 2018, respectively, Business Standard has learnt.

The two market debuts, through initial public offerings (IPOs), are part of the Centre’s plan to list a number of public sector undertakings (PSUs) from railways, defence, and insurance in view of an ambitious disinvestment target of Rs 72,500 crore for 2017-18.

According to multiple sources close to the development, the ministries of finance and railways are targeting to launch the IPO of IRFC, the financing arm of the railways ministry, in November. On the other hand, the listing of IRCTC is likely to be in January, which will give officials enough time to sort out the issues related to service charge waiver.

“We expect a good valuation for IRFC. Though the Department of Investment and Public Asset Management (Dipam) is looking into the day-to-day affairs, the railways is expecting the listing of IRFC by the end of November,” said a senior railway ministry official. According to finance ministry sources, the red herring prospectus for IRFC is expected to be out soon.

Dipam has already appointed ICICI Securities, SBI Caps, IDFC, and HSBC as bid managers for IRFC, while SBI Caps, IDBI and Yes Bank will be in charge of taking IRCTC to the bourses. IDBI will be the manager for another railway subsidiary Ircon. “Ircon is not on our immediate priority list. IRFC is our priority because of its higher ratings,” the official said.

The listing of IRCTC may face some difficulty as the Centre has waived the service charge on online train ticket bookings through the IRCTC website. This was done on November 23 last year to boost online transactions after demonetisation.

An annual waiver of service charge will lead to a hit of about Rs 500 crore on IRCTC’s top line. Before the waiver was implemented, IRCTC used to charge Rs 40 a ticket for bookings in air-conditioned classes and Rs 20 a ticket in the sleeper class. Though the finance ministry has agreed to reimburse for IRCTC’s losses, so far only Rs 80 crore has been allotted in this regard. Further allocations are expected in the supplementary demand for grants in the winter session of Parliament.

IRCTC posted Rs 551 crore in income from railway ticketing in 2015-16, up from Rs 256 crore in 2014-15. Meanwhile, in 2015-16, IRFC’s cumulative funding to the railway sector crossed Rs 1.5 lakh crore. The company posted a profit before tax of Rs 1,949 crore in FY16 as against Rs 1,941 crore the previous financial year.

The PSUs for which IPOs are being planned this fiscal year include IRCTC, IRCON, IRFC, RVNL, Garden Reach Shipbuilders, Mazagaon Dock Shipbuilders, Bharat Dynamics, New India Assurance, General Insurance, National Insurance, Oriental Insurance, and United India Insurance, among others.

Out of the FY18 disinvestment target of Rs 72,500 crore, Rs 46,500 crore is expected to come in from minority stake sales, buybacks, mergers, public listings and through the CPSE ETF route; Rs 15,000 crore is budgeted to come in from strategic sale; and the remaining Rs 11,000 crore from the listing of five state-owned general insurance companies.

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