Brokerage houses shower positive RVNL IPO recommendations


Last updated on January 12, 2020

Rail Vikas Nigam Limited (RVNL) is coming with its maiden offer today and brokerage houses have come out with their recommendations. The IPO, priced in the range of INR17 to INR19 per share, has got positive ratings from ICICIdirect and Choice Broking. Here is a snapshot of RVNL IPO recommendations.

ICICIdirect cited several positive factors such as strong executable order book, expertise in project development & execution and large ongoing & upcoming investment opportunity in railways and recommended investors to subscribe to the IPO. “At the IPO price band of INR17-19, the stock is available at a price to earnings multiple of 7x while comparable peers are trading at an average multiple of 6.6-12.7x. The company has a robust balance sheet and is available at an attractive dividend yield of ~4%. Backed by a solid order backlog and strong execution capabilities, we recommend SUBSCRIBE to the issue at the offer price,” said analysts Chirag Shah and Rohan Pinto in their research note.

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Similarly, Choice Broking is positive about the prospects for IPO investors. The brokerage house finds the company’s key strengths in project development and execution, an asset light business model and faster decision making. “At the higher price band of Rs. 19 per share, RVNL’s share is valued at a P/E multiple of 7x (to its restated FY18 EPS of Rs. 2.7), which is at discount to peer average of 11.9x. Thus considering the above observations and demanded valuation, we feel that concerns like erratic government policies and performance of PSU IPOs seems to have been factored in the price. Thus, we assign a “SUBSCRIBE” rating for the issue,” said its IPO note on Rail Vikas Nigam IPO.

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Angel Broking has also advised its clients to go for the upcoming IPO. “In terms of valuations, PE works out to 6.9x FY18 EPS of `2.77 and annualized 6MFY19 PE works out to 7.8X (at the upper end of the issue price band) which is reasonably priced considering (a) healthy order book with near and long term execution visibility, (b) highly capable and experienced management coupled with asset light business model, (c) healthy dividend payout ratio around 30% in last three years, (d) diversified revenue segment, and (e) increasing revenue opportunity from railways due to new investment in electrification and infrastructure. Given that RVNL is an executing agency of MoR, we believe it is in a sweet spot to tap the upcoming opportunities in Indian Railways. On the basis of the above arguments, we recommend SUBSCRIBE to issue,” said its research note, adding further to positive RVNL IPO recommendations.

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Centrum Broking finds the IPO attractively priced as compared to peers like IRCON International on the basis of PE ratio. “Given the government focus on rail infrastructure spends, healthy order book, asset light model and reasonable valuation, we suggest that investors can subscribe to the issue from a long term perspective,” noted the brokerage house.

Another positive word came from Canara Bank Securities which noted that a change in government policies could be harmful for the company. “The outcome may have bearing on size of the future order flow and margins. Nevertheless, Rail Vikas commands better bidding prospects due to the proven past record,” said its IPO note.

Please visit our discussion page for RVNL IPO for more details about grey market rates and other discussion.


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