RailTel to make money through IPO, disinvestment

After the successful public issue of Indian Railway Catering and Tourism Corporation (IRCTC), the Railways is now working on the disinvestment of RailTel, the most profitable telecom company under its aegis.

RailTel Corporation, a Category-I Mini Ratna PSU is one of the largest neutral telecom services providers in the country owning a pan-India optic fiber network on right to way along the railway track.

The company has created over 52,000 RKMs (route kms) of fiber network connecting over 4,500 cities or towns on the network including several rural areas. With this, the optical fiber network covers all important urban and rural areas, reaching out to 70% of the country's population.

The company also has two Tier-III certified data centres as well. Along with providing nationwide broadband telecom and multimedia network, RailTel is also engaged in the modernisation of train operations and the administration of network systems for Indian Railways.

The company is also aggressively entering the enterprise services market with the launch of its various services such as Data Center, Railwire, Telepresence. Recently, RailTel has also acquired a Unified License.

RailTel, with its rich experience in the domain of Telecom & ICT field, has been selected for implementation of various government projects in the telecom field such as the National Knowledge Network (NKN), National Optical Fiber Network (NOFN) and North East OFC project under Universal Service Obligation Fund (USOF) scheme.

With the vast expertise in the telecom sector, the government hopes to raise Rs 300 crore through IPO of RailTel Corporation.

However, while listing the company, Railways will be extra cautious so that it fetches good value. In IRCTC, the price band was fixed at just Rs 320 while it was listed at Rs 644 on the BSE and closed at Rs 729 valuing the company at nearly Rs 11,700.

In IRCTC, the government had raised Rs 645 crore for the 12.6% stake that it sold, which valued the company at over Rs 5,000 crore, raised several questions on merchant bankers on valuing the company.

IPO early next year

Since the RailTel is the only profit-making telecom firm, the government is hoping to fetch good money by selling its stake. The government is looking to divest up to 25% in the company through initial public offering as it is scouting for advertising agencies to manage the listing process, an official in the Railway Ministry said.

“RailTel is one of the very few consistently profit-making, dividend-paying, debt-free telecom PSU’s despite tough competition in the market. In the last financial year, RailTel achieved Rs 1,017 crore turnover, with an operating margin of Rs 184 crore", Puneet Chawla, CMD/RailTel said.

Some of the ongoing and new projects of RailTel include Station Wi-Fi project, RailwireSaathi, NIC e-office, Video Surveillance system, Modern Train Control system.

Under the Wi-Fi project, the number of unique users per month on Wi-Fi has grown to 1.51 crore consuming 10,242 TB data. RailTel has successfully started executing Railwire Saathi project to carry out assisted internet usage. It also plans to encourage rural entrepreneurs – who will man Railwire Saathi kiosks at stations to extend various online e-governance services of the Government of India to the rural population. The kiosks will be set up at 200 stations as a pilot, he said.

The NIC e-office, implemented by RailTel is helping Indian Railways to adopt a paperless work culture, saving tons of paper every day. E-Office has been implemented over 58 establishments of Indian Railways to provide a reliable, efficient, and effective way to handle office files & documents.

RailTel has also been selected to implement various mission-mode projects of the government in the field of telecom.

The company offers a bundle of services like MPLS-VPN, Telepresence, Leased line, Tower Co-location, Data Centre services and is also engaged in transforming railway stations into a digital hub by providing public Wi-Fi at major railway stations.

Currently, over 5,500 stations are live with RailTel’s RailWire Wi-Fi. With all these, we expect the company would fetch good value in the market, Minister of State for Railways Suresh Angadi said.

With the Centre planning to raise Rs 90,000 crore through disinvestment of public sector undertakings in the current fiscal against Rs 84,972 crore in 2018-19, the Cabinet Committee on Economic Affairs in April 2017 approved a plan to list six public sector companies including IRCTC and RailTel.

The IRCTC received a very good response from all categories of investors with the issue being oversubscribed 111 times. The government is planning the RailTel IPO to hit the market in early 2020.

Addressing the RailTel foundation day function recently, Railways Minister Piyush Goyal suggested the company to take up the challenge and aim for bigger heights and become a Rs 10,000 crore company in the next few years.