IRCTC Shares up for grabs at ₹680 as Government Sells 5% via OFS

The Central Government of India will sell up to a 5% stake in Indian Railway Catering and Tourism Corporation (IRCTC) through an offer for sale (OFS) on the Bombay Stock Exchange and National Stock Exchange on 15 and 16 December. This move is part of the government's efforts to meet its steep divestment target for the 2022-23 financial year.

On Day 1, i.e. 15th Dec, IRCTC was oversubscribed by 3.08 times by institutional investors. Let's see how retail investors bid on it today.

The floor price for the OFS has been fixed at ₹680 ($9.26) per share, representing a discount of over 7% compared to the closing price of INR 733.50 ($9.97) on the day of the announcement. At this price, the sale of a 5% stake in IRCTC could raise approximately INR 2,720 crore ($370 million).

The government plans to sell a 2.5% stake in IRCTC, with the option to offload an additional 2.5% if necessary. Up to 4 Crore equity shares will be offered in the OFS, according to a regulatory filing by the state-owned firm.

The OFS will take place on a separate window of the stock exchanges on 15 and 16 December, from 9:15 am to 3:30 pm on both days. Only non-retail investors will be able to place bids on 15 December, while retail investors will be able to place bids on 16 December.

The OFS is being managed by Axis Capital, Citigroup Global Markets, Goldman Sachs, and JM Financial. For the quarter ended September 2022, IRCTC's net profit after tax from continuing operations rose by 42.5% to INR 226 crore ($30.7 million). However, this represented a sequential drop of 7.7% from the INR 245.5 crore ($33.3 million) recorded in the previous quarter.

The government's disinvestment target for the year is INR 65,000 crore ($8.9 billion). In November, the government raised INR 3,839 crore ($521 million) from the sale of Axis Bank shares held by a government investment vehicle.

IRCTC is the tourism and catering arm of the Indian Railways. The government currently owns a 67.4% stake in the company, which has a market capitalization of INR 58,792 crore ($7.9 billion). Ahead of the OFS announcement, IRCTC shares closed 1.47% higher at INR 733.50 each on the NSE.