In today's article, we are going to talk about a new IPO named RailTel and we will discuss the company's business, industry company financials and by the end of the article I will tell the pros and cons of investing.
Upcoming IPO 2021: In this RailTel IPO review, we have tell you about the RailTels IPO launch date, News, Price, Price Band, Lot Size, the Business model and its Financials in detail.
Let's move towards the company and its business Friends, RailTel was incorporated in 2000 by the Ministry of Railway, and its objective was set to have better communication and better control and other than that broadband optical fiber to be put together with the railway line all over India because of which the company can make additional revenue.
If I talk about June 2020, the company's optical fiber network is 55,000 km long and its presence is in 5600 railway platforms from this, you can understand how vast the operations are across India. If I give you the overview of RailTel's business, it is called ICT, information and communication technology and other than that infrastructure provider. Under these the company has been operating there business in the past few years.
Let's talk about the company's business and services in detail.
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Telecom Network Services
First being telecom network services where it provides long-distance communication and various teleservices including data, voice, fax, text, video, and multimedia. If I talk about the telecom infrastructure the company provides storage, power, cooling, and physical security for servers and networking equipment. The third service is provided in managing data center and hosting services where different data centers can be hosted. wherein the company provides its infrastructure to host different data centers.
Lastly, if I say the company provides project services, where assume that the railway needs to get a complete project done where different services would be used RailTel takes up these projects as services and provides them to the Ministry of Railway. This was about the company's business, lets talk about the services that we discussed in detail, how much the company generates revenue from if we talk about the total revenue of the company.
The company's total revenue is 1128 CR where the largest share is of the telecom network services of 51.5% is generated. After that projects meaning system integration services from which the company generates 33.99% revenue and telecom infrastructure services generate 11.99% revenue, and from the managed data center and hosting services 2.52% revenue RailTel's main clients are the Ministry of Railway. If I talk about last year, 25% of revenue came from there Other than this the company has been providing its services in the form of B2B from which it generates revenue.
So friends if we talk about the industry under which this company operates, we can divide the major services into three parts named wireless services, wireline services, and enterprise services. Wireline as you know a few years back when communication was done through wired lines. If I talk about wireless in today's time data is used to communicate and where OTT platforms also come into the picture.
If we talk about enterprise services the companies which provide communication to organizations across locations. If we talk about the whole telecommunication industry where you know new players entered because of which there was an extreme level of competition and many small players exited the industry due to which we saw consolidation on a huge scale in the past few years Friends this was about the company's business, let's talk about its financials, and let's try to understand how the company grew in profits and revenue.
If I say the company made 1021CR in 2018 where the company made a profit of 134 CR, in 2019 the company made a revenue of 1038CR and a profit which was almost similar to 2018 being 135 CR. In 2020, the company's revenue was 1166 CR and a profit which increases to141CR And if we talk about this year, the company has generated a revenue of 553 CR and a profit of 45.5CR up until now.
If we talk about these numbers, they are almost the same with a little growth to be seen in 2020 but no significant jump can be seen in the company's revenue and profits in the past few years. If I talk about the company's price to earnings ratio which is 20 as compared to 22 of the industry which means the price at which the company wants to be listed is almost comparable to the industry's PE ratio.
If we talk about the last 5 years, the company's revenue has grown by a CAGR of 15% and a profit risen by 3.2% CAGR After talking about the financials, let's talk about the different pros of investing in this IPO.
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Pros
If we talk about this industry, many companies existing are loss-making companies wherein RailTel is a profit-making company. and the interesting fact is that this company has been profitable from 2007 till now. If we talk about neutral telecom infrastructure providers under which the company has been operating, whichever projects are of national importance are given to this company and the projects pipeline of this company in the coming time is good meaning many more projects could come to them or are already with them.
If we talk about the Indian Railways, they are undergoing many digital transformations and many platforms have WIFIs installed but in the coming future, the plan is to get WIFI on all the platforms. If these are executed the company can gain a huge advantage because all those projects are taken up by this company only.
The sector under which this company operates is a capital intensive sector meaning to run your business, a lot of capital is needed but even after this, the company is a debt-free company which can be considered a positive point.
cons
After this friends, let's talk about the cons of investing in RailTel first being the industry in which they come under is a very highly regulated industry, meaning if any norms or regulations are changed it would directly affect the company's operations soo you should analyze this before investing.
The second important pointer being that there are some legal proceedings in progress on this company which you should study that what are they and how does it impact the company.
Third, if we see the net profit margin, in 2015 the net profit margin was around 20% but if we see the recent net profit margin is around 8%, so you should also see that why the net profit margin is decreasing and in the coming times what steps the company is going to take to improve their net profit margin Lastly, as I told you that the company's 25% of the revenue comes from one client named Indian Railways.
Now here the company's dependency on Indian Railways is quite huge because of which how the company will try to diversify is also an important pointer about which we should know as an investor.
IPO dates
Let's quickly talk about the important IPO dates. Friends the IPO will be open from 16th Feb to 18th Feb. The IPO bidding price has been kept between RS 93 and RS 94. and to bid for one lot you need to bid a minimum of 155 shares. soo one lot equals 155 shares into 93 or 94 wherever you want to bid.
The company is bringing a 918 CR IPO and the whole of it is an offer for sale meaning the government is selling its stake in the company. The main objective is the disinvestment of the government where the government wants to disinvest its stake in the company.
So friends this was our article on RailTel's IPO and I hope you liked it. Do comment and let us know that what do you think, should you invest in this IPO or not stating your reasons too.
soo that from your comments our viewers might learn something helpful Other than this, whatever articles we bring to you are purely for educational purposes and we don't give any buy or sell recommendations about any stock.
Happy Investing!!
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