Indian Railway Finance Corporation Ltd (IRFC) shares fell as much as 6 per cent in Thursday’s trade as the government was planning to sell a part of its holding in the financing arm of the Indian Railways through an offer for sale (OFS) in the ongoing financial year. The government held an 86.36 per cent stake in the state-owned company as on June 30.
The Indian Railways’ PSU stock is one of the multibagger stocks that Dalal Street has produced in recent years. In the last year, IRFC’s share price has delivered more than 130 per cent return to its positional shareholders. The ascended to its new lifetime high last week after the announcement of Q1 results 2023. However, the railway PSU stock is under pressure since early morning deals. IRFC share price today opened lower and went on to hit an intraday low of Rs 48.25 per share, retracing nearly 9 per cent from its lifetime peak of Rs 52.70 per share on NSE.
On Wednesday, media reports suggested that the government is considering selling some of its stake in the state-owned IRFC as it aims to meet its divestment targets for the year. The government owns a little over 86% of the Indian Railways’ funding arm.
“The stake sale would take place soon,” a Reuters report said quoting a government official. While the government is yet to decide the exact quantum of sale, it will aim to sell up to 11% in multiple tranches, the report added.
“The stake sale would take place soon,” a government official quoted by Reuters said. The official added that while the government is yet to decide the exact quantum of sale, it will aim to sell up to 11.36 per cent in multiple tranches, as per the plan so far. At the current market price, sell of 11.36 per cent would fetch the government around Rs 7,600 crore.
To make the central public sector enterprise compliant with Sebi’s minimum public shareholding (MPS) norm, the government has to dilute its 11.36 per cent stake in IRFC.
As per MPS norm, a listed entity must have a minimum public float of 25 per cent within five years of listing.
IRFC got listed on stock exchanges in January 2021. The share sale consisted of a fresh issue of shares by the company and an additional 4.55 per cent stake dilution by the government.
As per estimates, a sale of 11.36 per cent stake would fetch the government around Rs 7,600 crore at the prevailing market price.
Last month, the government sold a more-than-5% stake in another state-run railways company, Rail Vikas Nigam, raising Rs 1366 crore ($164.34 million).
So far in fiscal 2024, it has raised Rs 5600 crore against a target of Rs 51,000 crore.
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