IRCON's offer for sale: Everything you need to know

We explore if the infra PSU is a worthwhile investment

IRCON's offer for sale: Everything you need to know

IRCON International , a public sector company specialising in transport infrastructure, has announced an offer for sale (OFS). For the uninitiated, an OFS is a financial mechanism allowing promoters of listed companies to sell their shares directly to investors.

The OFS is scheduled for two days: December 7 and 8, 2023. Retail investors will only be permitted to participate on December 8, 2023.

The floor price of the OFS has been set at Rs 154 per share, more than 10 per cent lower than the stock's closing price on December 6, 2023. Consequently, its share price tanked nearly seven per cent in the early trading session of December 7, 2023.

The rationale behind the OFS

The OFS is part of the government's ongoing efforts to divest its stake in public enterprises. Prior to the OFS, the government held a 73.1 per cent stake in IRCON. It plans to divest 4 per cent of its stake to raise about Rs 579 crore. Also, it may divest an additional 4 per cent if the OFS is oversubscribed. Note that the company will not receive any of the proceeds. The OFS is purely for divestment purposes.

About IRCON International

It is a subsidiary of Indian railways and primarily constructs roads, bridges, railways, airports, airport runways, etc., for the Indian government. However, the majority of its revenue originates from railway projects.

As of the quarter ending September 2023, it boasted a strong order book worth Rs 32,152 crore.

IRCON's performance over the years

It witnessed a significant decline in operating margin in FY23

Financials FY23 FY22 FY21 FY20 3Y growth (%)
Revenue (Rs cr) 11190.05 7821.64 5773.65 6096.36 22.4
Operating Profit (Rs cr) 453.29 531.05 479.27 387.64 5.4
Operating Profit Margin (%) 4.1 6.8 8.3 6.4
PAT (Rs cr) 765.23 592.27 391.06 485.27 16.4
Cash Flow From Operation -167.83 1414.06 518.12 -135.74 -7.3
Free Cash Flow to Firm -209.11 1398.08 475.52 -197.74 -1.9

Interested investors should note that, despite healthy revenue growth, the company has witnessed volatile operating margins. Also, other income accounted for nearly 40 per cent of its net profit in FY23.

Note that the above is not a stock recommendation. Please do the due diligence before investing.

Also read: SJVN initiates offer for sale

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