The initial public offering of state-run Rail Vikas Nigam Ltd covered barely a tenth of the total distance on the first day of the issue as institutional investors stayed away.
The offering of 253.46 million shares was subscribed 9% after receiving bids for 21.9 million shares, stock-exchange data showed. The IPO will close on April 3.
Retail investors led the bidding as the portion of shares reserved for them was almost one-fourth covered. The quota set aside for Rail Vikas employees was subscribed about 15%.
Institutional buyers didn't make any bid while non-institutional investors such as corporate houses and affluent individuals placed orders for less than 2% of the shares reserved for them.
The IPO of Rail Vikas is part of the government's disinvestment programme. It comprises only a share sale by the government and the company is not raising any fresh capital.
The government has set a price band of Rs 17-19 apiece. Retail investors will get a discount of Rs 0.50 on the price at which the shares are allotted.
The company, which was created in 2003 for rail project development and mobilising financial resources, is seeking as much as Rs 3,950 crore (about $574 million) in valuation from the IPO.
At the upper end of the price band, the government will raise Rs 481 crore ($70 million). This is after the company increased the issue size to 253.45 million shares from 209.15 million shares it had proposed to sell at the time of filing the IPO draft prospectus. In other words, the government is now offloading a 12.16% stake compared with 10% proposed earlier.
After the IPO, the government’s holding will drop to 87.84% from 99.99%. Rail Vikas will get three years from the listing date to bring down the government's holding to 75% or below, as per the minimum public shareholding norms for listed companies.
The company had filed its draft prospectus in March last year and received regulatory approval to float an IPO two months later.
Yes Securities (India), Elara Capital (India) and IDBI Capital Markets & Securities are the merchant bankers for the IPO.
Rail Vikas executes all types of railway projects including new lines, gauge conversion, railway electrification, metro rail projects, workshops and major bridges. The company had an order book of Rs 77,504.28 crore as on December-end 2018.