IRCTC IPO opens today: All you need to know before you invest in it

The state-run Indian Railway Catering and Tourism Corporation (IRCTC), the tourism and catering arm of Indian Railways, will hit the market today with its initial public offering (IPO).

According to CNBC-TV18, IRCTC plans to raise up to Rs 645 crore through an initial public offering. The IRCTC IPO will open for subscription on September 30, with a price band of Rs 315 to Rs 320 per share. The offer is a part of the government's divestment programme for the current financial year 2019-20 and shares will be offered to employees and retail investors at a discount to the final price.

The IRCTC is a central public sector enterprise owned by the government under the administrative control of the Ministry of Railways. After RITES, Rail Vikas Nigam and IRCON International, IRCTC is the fourth entity of the Indian Railways to be listed since 2018. The IPO will close on October 3.

An IPO is a financial instrument through which an unlisted company offers shares to the public. The funds raised are used for various purposes, like working capital, debt repayment and acquisitions.

Key things to know about the IRCTC IPO:

The IRCTC IPO comprises an offer for sale of 2 crore shares, representing 12.50 percent of total paid-up equity by the Ministry of Railways. There would also be additional employee reservation portion of 1.6 lakh shares, taking the total offer size to 12.6 percent of total paid-up equity. The issue comprises an offer for sale of 2,01,60,000 shares (representing 12.50 percent of total paid-up equity) of the face value Rs 10 each by the President of India.

The issue price is fixed in a range of Rs 315 to Rs 320 per share. The retail investors and employees will get shares at a discount of Rs 10 per share to final offer price.

The company aims to raise Rs 635.04 crore at Rs 315 per share, the lower end of price band and Rs 645.12 crore at Rs 320 per share, the higher end of the price band.

The lead managers for the IRCTC IPO are SBI Capital Markets Limited, IDBI Capital Markets & Securities Limited and Yes Securities (India) Limited.

IRCTC was incorporated on September 27, 1999, as a public limited company and was conferred a mini-Ratna status by the government on May 1, 2008. IRCTC has diversified into non-railway catering services like e-catering, executive lounges and budget hotels.

IRCTC's stake sale is a part of the Modi government's full-year divestment programme. In total, the Centre aims to raise around Rs 90,000 crore by way of disinvestment of Central Public Sector Enterprises in FY20, up from Rs 85,000 crore in FY19.

IRCTC is the only entity authorised by the Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India, according to the draft red herring prospectus (DRHP).

IRCTC operates one of the most transacted websites (www.irctc.co.in), in the Asia-Pacific region with transaction volume averaging 2.5 to 2.8 crore transactions per month during the 5 months ended August 31.

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