Large Rail PSUs to Hit the Public Markets to Meet Highest-Ever Divestment Target

The Indian Railways has unleashed a series of IPOs to mop up about Rs 1,500 crore in the current fiscal.

New Delhi: Reeling under limited fiscal space amid an economic slowdown, the Narendra Modi government is opening up greater private investment with a steady stream of public sector units (PSUs) stepping up their disinvestment drive.

The Indian Railways has unleashed a series of IPOs to mop up about Rs 1,500 crore to begin with in the current fiscal.

While the IRCTC, the railways’ ticketing and catering arm, would open up its Rs 650 crore initial public offer (IPO) on Monday, two more railways PSUs are gearing up to follow suit in quick succession.

RailTel and IRFC, the telecom infrastructure provider and financial service arm of the Railways respectively, would list their shares on the market shortly as part of the broader quest to achieve an all-time high disinvestment target of Rs 1.05 lakh crore. 

Divestment revenue, crucial for bridging the fiscal deficit gap, is in focus as the government has prepared a list of about 43 PSUs to be divested in phases.

Also Read: Railways Hopes to Get Passengers to Pay up to 71% More for Train Tickets

The 12.5% divestment of IRCTC is expected to elicit a good response as it has a unique business model, and, more importantly, the company does not have any competition across any business segment.

The Indian Railway Finance Corporation (IRFC), the dedicated financing arm of the Indian Railways for mobilising funds from domestic as well as overseas capital markets would go for 5% divestment.  

RailTel, which is providing Wi-Fi at all major stations across the country, has achieved a turnover of Rs 1,017 crore and posted a profit before tax amounting to Rs 179 crore and net profit of Rs 110 crore during 2018-19 on a standalone basis.

According to sources, RailTel will offload about a 10% government stake through its IPO shortly. 

Most PSUs to go for divestement

Barring a few, all rail PSUs will go for divestment as per the decision. Railways PSUs such as Konkan Railway, Mumbai Railway Vikas Corporation (MRVC) Dedicated Freight Corridor (DFC) and Braithwaite & Company Limited (BCL), however, are not being considered for disinvestment.

Railways blue-chip companies such as IRCON, RITES and RVNL are in for offloading about 13% of their shares by the year-end or early next year.

Like Air India, the rail PSU Concor is slated to be on strategic disinvestment where railways will have to offload its major share.

Though the decision to divest PSUs was taken in 2010, it has got the traction recently with the concerned ministries, including railways, stepping up the drive to meet the goal.

Besides divestment, the Railways is also pushing for the privatisation of its passenger service amid a whopping loss of over Rs 40,000 crore in the segment.

While the IRCTC has been nominated to run two private trains on Delhi-Lucknow and Mumbai-Ahmedabad routes, there are about 50 routes up for grab across the country including Delhi-Mumbai, Delhi-Kolkata, Delhi-Patna and Chennai-Mumbai.

The Railways will lease out the paths to private players while the signalling and platform will remain with the public behemoth.

Arun Kumar Das can be contacted at akdas2005@gmail.com