Government to sell more shares in IRFC as offer for sale receives strong bids

New Delhi: The government’s stake sale in Indian Railway Finance Corporation Ltd (IRFC) on Wednesday saw a strong response from institutional investors, with the issue subscribed 1.86 times on the first day. In view of the strong demand, the Center decided to exercise the greenshoe option, which allowed it to sell an additional 1% stake in the state-owned company.

In a post on X, Department of Investment and Public Asset Management (DIPAM) Secretary Arunish Chawla said that the offer for sale (OFS) was subscribed 1.86 times on the opening day and that the government will use the green shoe option to meet the excess demand from investors.

“Retail investors and eligible employees can bid on Thursday,” Chawla said.

The government originally planned to sell a 1% stake in IRFC with an additional 1% redistribution to meet excess demand. The minimum issue price was set at ₹91 per share, representing a discount to the prevailing market price. At the minimum price, the government is expected to raise o ₹2,379 crore from the sale of shares.

IRFC shares fell 6.2% to settle ₹92.53 on the BSE on Wednesday.

The government currently owns 11.06 billion shares, equivalent to an 84.65% stake in IRFC. Based on the previous day’s closing price ₹98.69 per share, the center’s stake value is estimated at ₹1.09 trillion, while the total market capitalization of the company is at par ₹1.29 trillion.

Reflected trust

Ranjanesh Sahai, former secretary of the Railway Board, said the strong investor response reflected confidence in IRFC’s evolving business model, diversified funding portfolio and growth prospects.

“IRFC became a financier limited to railways. When the railway budget was merged with the general budget, IRFC’s future looked unclear. However, as its basket of institutional borrowers expanded over time and its books became more robust, it pleasantly surprised the investment community with a quantum leap in both scale and reputation,” said Sahai.

“Rapidly growing profit margins and visible strengths of the company reflected in the confidence of institutional investors, resulting in the stock being heavily oversubscribed. The bigger test will come tomorrow when the aam aadmi (retail investors) will also react to the offer,” he added.

Mint reported on May 13 that the railway ministry plans to sell 2-3% minority stakes in its listed state-owned companies through the OFS route — in which no new capital is raised and the proceeds go to existing shareholders instead of the company — in FY27 as part of the government’s disinvestment and asset monetization program ₹80,000.

So far, the government has raised ₹16,479.89 crore by selling stakes in five public sector companies.