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Salient features of the IPO:

* RailTel Corporation of India Ltd. (RailTel), a miniratna fully owned by the central government that provides telecom & data services to the public and private sectors is planning to raise up to Rs. 8,200mn through an IPO, which opens on 16th Feb. and closes on 18th Feb. 2021. The price band is Rs. 93 - 94 per share.

* The issue comprises of OFS issue only. Thus company will not receive any fund from the IPO.

Key competitive strengths:

* Among the largest neutral telecom infrastructure providers in India with pan-India optic fiber network

* Diversified portfolio of services and solutions

* Key partner to the Indian Railways in digital transformation

* Experience in executing projects of national importance with a robust pipeline of projects

* Strong track record of financial performance

* Professionally managed with strong corporate governance and senior management team with significant industry experience

Risk and concerns:

* Unfavorable government policies and regulations

* Lower spending from the central and state governments

* Difficulty in monetizing assets

* Competition from the private operators Peer comparison and valuation: There are no listed peers, having similar operating model. At the higher price band of Rs. 94 per share, the company’s share is valued at a FY20 P/E multiple of 15.8x (to its restated EPS of Rs. 5.9). Below are few key observations of the issue: (continued in next page)

* The Ministry of Railways (MoR) have formed RailTel in 2000, to undertake Indian railway’s (IR) tasks of expeditiously modernizing their entire telecommunications system for train control, operation and safety. IR has authorized the company to use their right of way for establishing and laying optical fiber cable (OFC) network, cables and pipes; and then transferring the OFC assets to RailTel. Pursuant to an agreement with the MoR, RailTel will commercially exploit the surplus capacity of the network while the MoR will continue to make captive use of the same.

* RailTel is one of the largest neutral telecom infrastructure providers in India. As of 31st Jan. 2021, it had an exclusive right of way along 67,415 route kilometers connecting 7,321 railway stations for laying OFC. The company has 59,098 route kilometers of OFC network, connecting 5,929 railway stations across towns and cities in India. It also has city wide access network of over 18,000 kilometers and offers high capacity bandwidth of up to 800G at 87 locations in India. The company also offers leased line and VPN facilities and also provide IP-1 services.

* Its pan-India network comprises various technologies including next generation network, packet transport network, DWDM and IP-MPLS that are maintained by network operations centers at Mumbai, Delhi, Kolkata and Secunderabad. These centers provide VPN, point-to-point leased line to enterprises, public sector banks, defense organizations and educational institutions. Additionally, the company has a central network operations center located at New Delhi that monitors the entire pan-India network

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