However, the proposed listing of another railway arm Indian Railway Finance Corporation (IRFC) is likely to be delayed further over lack of clarity on the exemption of a deferred tax liability.
In February, the ministry of corporate affairs had exempted IRFC from an accumulated deferred tax liability of Rs 63.92 billion, which was supposed to be added to the company’s net worth. IRFC faced a deferred tax liability as its depreciation was greater than profit. The company did not pay tax under normal assessment and was subject to a minimum alternate tax (MAT) of 21 per cent.
Besides, it had to make a provision for the deferred tax liability at 35 per cent. Thus, the company’s books were bearing a total tax provision of 56 per cent. After the exemption, this was supposed to come down to 21 per cent, leading to substantial gains in profit after tax (PAT), earnings per share and book value per share. “There is some lack of clarity on the issue, which may delay the IRFC stake sale,” he said.
The government had in the Union Budget set a disinvestment target of Rs 800 billion for 2018-19. The total disinvestment proceeds for 2017-18 was Rs 1 trillion, higher than the target. Dipam has invited bids for engaging advertising agency for divestment of up to a 25 per cent stake in Rail Vikas Nigam Ltd (RVNL).
RITES, which posted a turnover of Rs 15.09 billion in 2016-17, is strategically important to India because it has operations in 55 countries across the world.
IRFC is one of the most anticipated stake sales among the railway subsidiaries. By the end of March 2017, it had assets worth Rs 1.52 trillion, including 8,998 locomotives, 47,825 passenger coaches, and 2,14,456 wagons that it has funded. It has also provided Rs 36.12 billion to other railway entities (RVNL and RailTel Corporation) and capacity enhancement works of Rs 20.78 billion.