IRFC IPO: Zee Business Managing Editor Anil Singhvi says that the equity size of Indian Railway Finance Corporation is very big, so the share price will not move quickly. Also, as the share price is low, that is Rs 25 – Rs 26, and many investors will buy this share. Regarding IRFC strengths, the Market Guru said it is a Government company (parentage is very strong) and it is AAA rated company.  

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IRFC IPO: 3 Important positives  

Anil Singhvi highlights that there is nothing to worry regarding IRFC Balance sheet and Financials. The revenue and profit visibility of the company is extremely clear for next few years; it will keep on earning good profits for years to come. Anil Singhvi says basically, IRFC is the financier of Indian Railways. IRFC arranges major part of the finances that Indian Railways need. IRFC arranges for the finance after understanding the needs and requirement of Indian Railways, and lends it to Indian Railways after adding their margins for the service they give.  

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Secondly, the Government of India has segregated the operational and financial company of Indian Railways. This ensures that the fund management is done in an appropriate way. IRFC gets the money from the market on the basis of Government Guarantee and lends it to Indian Railways for expansion, operational activities and any other purposes. IRFC will keep on earning interest from Indian Railways. Thirdly, financing companies like Banks/NBFCs are valued on basis of price to book value. IRFC being a AAA rates, a Government company is being offered at book value at reasonable valuations and P/E multiple of the company is around 8-9. Valuations of IRFC are much cheaper that other NBFC’s which are trading at much higher valuations.  

IRFC Anchor Book Details: 

The Government of Singapore did buy 17% share in anchor book. Big 4 fund houses, namely HFDC, Nomura have bought 50%-60%. Such a strong anchor book gives confidence to investors to invest in IRFC. 
The market cap of IRFC is Rs 34000 cr. The stock will not move easily, says Singhvi due to equity size. After IRFC IPO, Government stake would come down to 86.6%, further the stake needs to be reduced by 11% - 11.5% to bring it close to 75% as required. Anil Singhvi says this implies that until the stake is not reduced till 75%, IRFC will not move.  

IRFC IPO Review:

Investors should invest in IRFC IPO only for long term. Anil Singhvi said he is not expecting big listing gains (40% - 50%) for IRFC. Listing gains of 10% - 15% is nothing in today’s time where many companies have more than doubled on the listing day giving over 100% return to investors on debut. 

IRFC IPO Review: Issue vs FDs

IRFC issue is a good substitute to FDs. IRFC IPO will give 12% to 15% return in a year which is double than what you get from FDs. Earnings of IRFC will neither rise or fall sharply, they will continue to perform reasonably.