The government is targetted to raise about Rs 453-466 crore through the RITES share sale, at a price band of Rs 180-185 a share, respectively.

Railways consultancy firm RITES will open its initial public offering for subscription on June 20, with a price band of Rs 180-185 per share.

It would be the first state-owned company to hit the IPO market in FY19. The issue will close on June 22.

The equity shares are proposed to be listed on BSE as well as NSE. Elara Capital India, IDBI Capital Markets & Securities, SBI Capital Markets and IDFC Bank are book running lead managers to the issue. Link Intime India is the registrar.

Here are 10 key things you should know before subscribing the issue:-

Company Profile

RITES is a wholly owned government company, a Miniratna (Category – I) Schedule ‘A’ public sector enterprise. It is a leading player in the transport consultancy and engineering sector in India and the only company having diversified services and geographical reach in this field under one roof (Source: IRR Report).

It has an experience spanning 44 years and has undertaken projects in over 55 countries including Asia, Africa, Latin America, South America and Middle East regions. It is the only export arm of Indian Railways for providing rolling stock overseas (other than Thailand, Malaysia and Indonesia).

It is a multidisciplinary engineering and consultancy organisation providing diversified and comprehensive array of services from concept to commissioning in all facets of transport infrastructure and related technologies.

In India, its clients include various central and state government ministries, departments, instrumentalities as well as local government bodies and public sector undertakings.

About the Public Issue

The issue consists of offer for sale of 2.52 crore equity shares by the government. Its 12 lakh equity shares are reserved for eligible employees.

The offer will constitute 12.60 percent of the post-offer paid-up equity share capital of the company.

Bids can be made for minimum 200 equity shares and in multiples of 200 shares thereafter.

Fund Raising

The government is targetted to raise about Rs 453-466 crore through the share sale, at a price band of Rs 180-185 a share, respectively.

The paid-up share capital of RITES currently stands at Rs 200 crore.

Objects of the Issue

RITES will not receive any proceeds from the offer and all the proceeds will go to the selling shareholder which is the Government of India.

Hence, the objects of the offer are (i) to carry out the disinvestment of 2.4 crore equity shares held by the selling shareholder in the company, equivalent to 12 percent of the paid up equity share capital of the company as part of the net offer, and 12 lakh shares that will be reserved for employee reservation portion, and (ii) to achieve the benefits of listing the equity shares on the stock exchanges.

Competitive Strengths

> Company provides comprehensive range of consultancy services offerings and has a diversified sector portfolio in the transport infrastructure space;

> It has large order book with strong and diversified clientele base across sectors. “As of March 31, 2018, order book stood at Rs 4,818.7 crore, which includes 353 ongoing projects of value over Rs 1 crore each;

The order book in consultancy services business stood at Rs 2,572.09 crore, leasing services Rs 140.65 crore, export sales Rs 697.74 crore and turnkey construction projects Rs 1,408.2 crore.

> It has technical expertise housed in various business divisions within company with specialised domain knowledge across each of the market segments;

> It has experienced management personnel and technically qualified team;

> RITES is the preferred consultancy organisation of the Government of India including the Indian Railways.

> It has strong and consistent financial performance supported by robust internal control and risk management system.

Financials

The company has been consistently profitable over the last five years and has paid dividends regularly to the equity shareholders.

As per the restated financial information, its total income has grown at a CAGR of 9.61 percent and profit grew at a CAGR of 11.61 percent during FY13-17.

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Shareholding

The government currently holds 100 percent stake in the company. After this public offer, promoter will hold 87.40 percent of the post offer paid-up equity share capital of company.

Management

Rajeev Mehrotra is the Chairman and Managing Director of the Company since October 11, 2012. He holds a Bachelor’s Honors degree in Accountancy and Business Statistics from Rajasthan University and is qualified as a Fellow Member of the Institute of Cost Accountants of India.

He has over 34 years of experience, out of which he has over 10 years of experience at the board level in company. He has also worked with the National Hydroelectric Power Corporation Limited, Faridabad and Power Finance Corporation Limited, New Delhi in various capacities.

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Dividend Policy

The dividend paid by the company during the last five fiscals and the current financial year till the date of this RHP:-

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Risks & Concerns

Here are some risks and concerns highlighted by brokerage houses:-

> The company depends on the Ministry of Railways (MoR) for a significant portion of its business including equipment, technical staff etc.

> The company’s current order book may not necessarily translate into future income.

> The company faces certain competitive pressures from the existing competitors and new entrants in both public and private sector.

> The government has significant influence over actions which may restrict company’s ability to manage business. Any change in government policy could have a material adverse effect on financial condition and results of operations.

> It is dependent on the line of credit provided by the government and other funding agencies provided to countries that it operates in.

> The company is subject to inherent risks associated with external suppliers, contractors and sub-contractors being involved in its projects.

> The company is in the process of winding up its subsidiaries, namely RISL, RITES (AFRIKA) and RMAC (Saudi Arabia).

> Revenues and profits are difficult to predict and can vary significantly from quarter to quarter

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