RITES share price makes positive debut, rallies 11% against issue price

RITES IPO: Shares of RITES made a positive debut on the bourses with the railway consulting firm listing at Rs 190 on the BSE, a 2.7 per cent premium over the issue price of Rs 185. The stock gained as much as 11.21 per cent to Rs 205.75 on the BSE against the IPO price. 

RITES IPO was open during June 20-22 and was in a price band of Rs 180-185. RITES is the first state-owned firm to hit the IPO market in the current fiscal year.

The share sale of the state-owned firm to raise about Rs 466 crore received bids for over 169 crore shares against the total issue size of 2.52 crore shares, resulting in a total subscription of 67.12 times.

The category set aside for qualified institutional buyers (QIBs) was subscribed 71.72 times, non-institutional investors 194.56 times and retail investors 14.72 times, merchant banking sources said.

Elara Capital (India), IDBI Capital Markets & Securities, IDFC Bank and SBI Capital Markets were the book running lead managers to the issue.

Most brokerages had recommended 'subscribe' on the RITES issue.

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"RITES’ revenue and PAT clocked 7 per cent and 9 per cent CAGR, respectively over FY14-17, while margin expanded to 32.0% in FY17 from 22.7% in FY14. Notably, RITES paid an average dividend of 27 per cent during the same period. Further, with total cash of Rs 25bn, RITES enjoys a robust liquidity," said Reliance Securities in its IPO note.

"Assuming moderate revenue growth of 10% CAGR through FY17-20E, the Company is valued at 8.6x FY20E earnings, which appears to be justified considering its unique business model, steady growth and healthy return ratios. Hence, we recommend SUBSCRIBE to the Issue," it added.