Why is GoI selling stake in IRFC?

The Government of India is mulling 11.36 per cent stake sale in financing arm of Indian Railways, the Indian Railway Finance Corp (IRFC). The government will sell stake because according to norms as laid by the capital market regulator, Sebi, central public sector enterprises are required to maintain a minimum public shareholding of 25 per cent within five years of listing. Currently, public shareholding in IRFC stands at 13.64 per cent. As, IRFC needs to push up  public shareholding to 25 per cent. That will only be possible when the Government will cut stake to 75 per cent from current  86.36 per cent.

The Government is the only other shareholder in the PSU apart from the public shareholders. Government holds stake in the PSU as a promoter. Currently, Government’s stake stands at 86.36 per cent. Therefore, central government might cut 11.64 per cent stake in IRFC to adhere to Sebi norms.

When will GoI bring IRFC OFS?

Since, IRFC was listed in January 2021, it still has three more years for making adjustments in the shareholding pattern. But government officials have confirmed that a meeting on this matter has already been held. And, the Government is looking to make shareholding pattern rejig in the current financial year itself. For which, it might sell the required 11.64 per cent stake in the PSU.

The government officials also said that the Centre will choose the OFS route for stake sale. At the current market price of Rs 50.97, the stake sale will fetch around Rs 7,600 crore to the exchequer.
So far, government officials have not confirmed date of the OFS.  Generally, OFS are put on floor for two days. On first day, institutional investors get the opportunity to subscribe to the shares. While, retail investors can subscribe to the OFS only on the second day.

At what price will GoI bring the OFS?

The OFS issue price is not confirmed yet. But, it is more likely that government will sell shares at a certain discount. Then, only, the government will see active participation from the subscribers.

Impact of OFS on IRFC’s share price?

On the news on the OFS, IRFC’s stock made a new 52-week high of Rs 52.71 on the BSE on Wednesday. In the last one year the stock has jumped more than 100 per cent.

What about other OFS that government previously brought?

In the current financial year, the government has already earned Rs 5,600.93 crore by divesting stakes in PSUs like HAL, Coal India and RVNL. The GoI has set a disinvestment target of Rs 50,000 crore for FY24.