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About the Company

Incorporated in 2000, RailTel Corporation of India Ltd. (Rail Tel) is an information and communications technology (ICT) infrastructure provider and one of the largest neutral telecom infrastructure providers in India. It is a Mini Ratna (Category-I) Central Public Sector Enterprise, wholly-owned by the Government of India and under the administrative control of the Ministry of Railways. It was incorporated with a key objective of modernizing the existing telecom system for train control, operation and safety and to generate additional revenues by creating nationwide broadband and multimedia network by laying optical fiber cable by using the right of way along railway tracks. As of January 31, 2021, its optical fiber network covers 59,098 route kilometers and covers 5,929 railway stations across towns and cities in India. It operates data centers in Gurugram, Haryana and Secunderabad, Telangana to host and collocate critical applications for customers including the Indian Railways. Its portfolio of services can broadly be classified as i) Telecom Network Services, ii) Telecom Infrastructure Services, iii) Managed Data Center and Hosting Services, and iv) Projects (System Integration Services). Rail Tel uses the latest technology like high dense wavelength division multiplexing (DWDM) and multi-protocol label switching (MPLS) network.

Objects of the Issue

* To carry out the disinvestment plan of the government

* To achieve the benefit of listing on the stock exchanges

Valuation

RailTel is amongst the largest neutral telecom infrastructure providers in India with a pan-India optic fiber network and has an exclusive right of way along 67,415 route kilometers connecting 7,321 railway stations for laying optical fiber cable. It offers a high capacity bandwidth of up to 800G at 87 locations in India, as of January 31, 2021.

It offers a diversified portfolio of ICT services and solutions including MPLS-VPN, leased lines services, TPaaS, e- Office services and data center services, large network hardware system integration, software and digital services. In addition to laying optical fiber cable network, its transport network is built on high capacity DWDM and an IP/ MPLS network over it to support communication requirements of the Indian Railways and other key customers. It has also built an optical fiber cable network across cities and towns in India to provide end-to-end bandwidth services through leased circuits, MPLS-VPN ports or Internet bandwidth ports.

Rail Tel serves as a key network for the Indian Railways. It provides a variety of services to the Indian Railways and has implemented MPLS data network for integrated payroll and accounting system, unreserved ticketing system, freight operations information system and coaching operations information systems.

Going forward, the company plans to expand its telecom services and deploy the latest technologies. It intends to create open radio access networks, small cell and tower infrastructure at railway stations for hosting telecom players to assist with their preparation for the 5G network.

Further, it plans to continue to invest in expanding its network and deploying the latest technologies to enable a high capacity next-generation network to deliver sustained value to its customers and improve their experience. It also intends to diversify and expand its services and solutions.

The financial performance of the company has been tepid with Revenue/ PAT CAGR of 7.5% and 2.6% over FY18-20. However, it has consistently paid a dividend since FY08. On the valuation front, the company is valued at a PE of 21.4x FY20 EPS. From a long-term perspective, investors can consider applying for the IPO.

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