The Indian government is set to divest up to a 4 percent stake in the state-owned Indian Railway Finance Corporation (IRFC). This strategic move will be executed through an Offer for Sale (OFS) starting Wednesday. The aim is to raise significant capital for national priorities.
The floor price for this OFS has been fixed at Rs 104 per equity share. At this price, the government expects to garner approximately Rs 5,430 crore. This substantial sum highlights the scale of the divestment initiative.
Secretary Arunish Chawla of DIPAM confirmed the details on social media. The OFS opens first for non-retail investors on Wednesday. Retail investors will get their opportunity to bid on the following day, Thursday.
The base offer size involves selling a 2 percent equity stake. An additional 2 percent is included as a green shoe option. This provides flexibility to capitalize on strong investor demand.
In concrete terms, the government proposes to sell up to 26.13 crore shares for the base 2 percent. An identical number of shares is earmarked for the green shoe option. This totals a potential sale of over 52 crore shares.
Currently, the government holds a commanding 86.36 percent stake in IRFC. Following the successful completion of this OFS, its holding will decrease. The stake is projected to fall to 82.36 percent.
This divestment is a key part of the government’s broader asset monetization strategy. It helps in unlocking the value of public sector enterprises. The funds raised bolster government resources for other development projects.
Market reaction was observed ahead of the OFS announcement. Shares of IRFC closed at Rs 109.40 on the BSE. This represented a decline of 2.19 percent for the day.
The OFS mechanism is a well-established route for government stake sales. It ensures a smooth and efficient process in the capital markets. This method helps in achieving disinvestment targets effectively.
IRFC plays a pivotal role in financing Indian Railways’ capital expenditure. Its strong linkage to national infrastructure makes it a significant entity. The government’s reduced stake does not diminish its strategic importance.
Investor participation will be closely watched. The split schedule between institutional and retail bidders is designed to ensure broad participation. Success could pave the way for similar future divestments.
The generated funds, around Rs 5,430 crore, will contribute to the national exchequer. This capital can be redirected towards vital sectors. It represents a strategic recycling of government assets.
This move underscores the ongoing efforts to deepen India’s equity markets. It also reflects confidence in the underlying strength of public sector companies. The divestment process is a balancing act between fiscal needs and strategic control.
The final outcome will depend on investor appetite at the set floor price. Market conditions will play a crucial role in the OFS’s success. All eyes are now on the bidding process over the next two days.