The Rs 820-crore RailTel Corporation of India’s initial public offer (IPO) was subscribed 42.4 times on the final day of the bidding process on Thursday. At 5:00 pm on the last day, the issue had received bids for 259,41,39,520 shares, which was 42.4 times the total issue size of 6,11,95,923 shares. With completion of the IPO, the government’s stake will decline from 100 to 72.8 per cent.

The institutional investors’ portion of the IPO was subscribed by 65 times, and the high-net-worth individuals’ (HNI) portion was subscribed by 73 times. The retail and employees’ categories were subscribed by 17 times and 3.4 times respectively.

The issue was offered in the price band of Rs 93 to Rs 94. At the upper limit of this price band, the IPO is valued at 21.4 times price to earnings (PE) on a FY20 trailing basis. Its enterprise value (EV) is four times the earnings before interest, tax, depreciation and amortisation (EBITDA).

According to analysts, RailTel is a debt-free company and pays consistent dividends and thus, could witness some traction. But there are a few red flags for long-term investors. Firstly, the company has delivered single-digit revenue and net profit from FY18 to FY20. There is high dependence on government entities and concentration risk, given that 23.8 per cent of its revenues comes from top-three customers. It is present in a highly-regulated industry which is another cause of concern.

RailTel, a Category-I, Mini-Ratna Central public sector enterprise (CPSE) under the Union Ministry of Railways, is an information and communication technology (ICT) provider. It is one of the largest telecom infrastructure providers in the country, owning a pan-India optic fibre cable (OFC) network on exclusive right of way along railway track. The OFC network covers all important towns and cities of the country and several rural areas.