IRCTC IPO commands 50% premium in grey market


IRCTC IPO commands 50% premium in grey market

The initial public offer (IPO) of state-owned Indian Railway Catering and Tourism Corporation (IRCTC), which opened for subscription on Monday, was reportedly trading at over a 50 per cent premium over its issue price band in the unofficial grey market.

According to market analysts, IRCTC IPO has generated strong interest levels among market participants in the grey market. The recent rally in the stock markets along with relatively cheaper pricing of the IPO and the company’s monopoly in the business are attracting investors. A grey market is an over-the-counter market where dealers execute orders for stocks and bonds for preferred customers before they have been issued.

In the grey market, IRCTC shares were changing hands at a premium of Rs 160 as against its price band of Rs 315 to Rs 320 per share, the Economic Times quoted brokers as saying.

The long-awaited Rs 645 crore IPO of IRCTC has hit the primary market today and the issue is getting a strong response from investors in wake of the recent rebound in equity market sentiment after the corporate tax cut. The IPO, which closes on October 3, has received bids for 8 per cent of the total issue within the first hour of day 1 of the bidding process.

Till 11 am, the issue had received bids for 16,06,560 shares against the issue size of 2,01,60,000 shares.

The IPO of IRCTC, the online ticketing, tourism and catering arm of the Indian Railways, is the largest of all four entities offered by the Railways after RITES, Rail Vikas Nigam and Ircon and has turned out to be most-watched share sale by prospective investors in recent times.

The IPO is entirely an offer for sale (OFS) by the government, where it is diluting 12.6 per cent stake at Rs 645 crore, amounting to 2.01 crore equity shares (2 crore shares). Starting with a minimum bid size of 40 equity shares (and in multiple thereafter), the stake sale will bring down the government’s share in the company by 12.6 per cent to 87.4 per cent against 100 per cent stake at present.

If the IPO is successful, it will help the Modi government meet its disinvestment target of Rs 1.05 lakh crore for the current fiscal. The government has budgeted to raise Rs 90,000 crore by way of CPSE disinvestment in the current fiscal, up from Rs 85,000 crore in FY19.


Written by Loknath Das