Despite the debacles of large IPO’s like Reliance Power, the market is being flooded with IPO’s one after the other.
It’s now the turn of Rail wagon producer from the private sector, The Titagarh Wagon to come out with an IPO. It is making an initial public offer to sell 23,83,768 shares with a face value of Rs 10 at a price to be determined through 100 per cent book building process. The issue will open on March 24 and close on March 27.
The price band for the Titagarh Wagons IPO has is in the range Rs 540 and Rs 610 per share.
Around 15,000 shares will be reserved for the eligible employee of Titagarh Wagon.
As per the news, At least 60 per cent of the net issue will be allocated on a proportionate basis to qualified institutional buyer, 5 per cent of the QIB portion will be allocated to mutual funds, and the remaining will be allocated to the QIB bidders including mutual funds. Further, not less than 10 per cent of the net issue will be allocated on a proportionate basis to non-institutional bidders and 30 per cent to retail investors.
The money raised from this IPO will be used for multiple purposes
• Setting up an EMU manufacturing facility at Uttarpara unit,
• Modernising and expanding the existing facilities at Titagarh and Uttarpara units,
• Setting up an axle machining and wheelset assembly facility at Uttarpara unit,
• Constructing a corporate office and a design cum research and development office,
• Strategic acquisition or investments, f) Brand building exercise and g) General corporate purposes.
The primary business of Titagarh Wagon is to manufacture special purpose wagons, and shelters and they primarily cater to the needs of clients like the DRDO, Ministry of Defense and so on. Apart from this, the company is also in the business of other special purpose wagons like Marry-go-round, etc. Though limited in customer base, the requirements in this field are aplenty and company needs to keep on making changes to the designs and shapes of the wagons and other products it manufactures.
The lead manager to the Titagarh Wagons IPO are Kotak Mahindra Capital and the co-book running lead manager is JM Financial Consultants.
Related: Should you apply for an IPO?
Interestingly, this will be a different sector altogether for listing in the secondary stock markets. Not many companies are there in the rail wagon manufacturing, except for some government run industries. However, that also explains the risk of this business. The more competition you have from government backed companies, the more unpredictable the future business is. What is tomorrow the government scraps all the projects from Titagarh Wagon and start manufacturing all the required customized wagons at its own rails coach factory at Kapoorthala?
| However, presently the order books of the company are full. So no problems for the company in the existing term. Investors who believe they can make a quick buck from this issue, can apply. Long term investors need to look out for government policies. | Table of Contents |
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