Railway Vikas Nigam third PSU to flop on bourses

Railway Vikas Nigam Ltd (RVNL) on Thursday became the third public sector company to see a tepid market listing since October. MSTC and Garden Reach Shipbuilders failed to make a stellar impact on the bourses and are trading below their issue prices.

RVNL listed at Rs 19, the upper end of the price band, on Thursday and remained there the whole day.

Garden Reach Shipbuilders, which makes defence ships and vessels, got listed at 12% discount in October at Rs 104.

Six months later it trades at Rs 99.

MSTC, which auctions all sorts of things for the government, including coal blocks and PSU lands, got listed on March 29 at Rs 111, a 7.5% to its issue price of Rs 120.

It rules at the same price after 13 days.

For MSTC as well as Garden Reach, subscription periods had to be extended for getting fully subscribed.

Investors shouldn't expect much appreciation at the time of listing and instead look at the long-term for PSU stocks, believes Jagannadham Thunuguntla, head of research (wealth) at Centrum Broking.

"Recent IPOs of public sector companies are basically long-term stories and many of these companies are reasonably valued offering long-term opportunities to investors. These shouldn't be seen from the perspective of listing gains alone," Thunuguntla said.

However, long-term appreciation in PSUs stocks may not play out as it is actually the dividend payouts that determine the returns from the PSU stock, he said.

Investors invest in PSU companies for two things: dividend yield and the long term story.

Take Coal India, for instance. While the stock is now close to its listing price, the company has paid aggregate dividends in excess of IPO price over the years.

"The main reasons behind investors' apathy towards these companies is the poor performance in the past recent times by several PSUs like Nalco, Hudco, National fertilizers and RCFL, which are trading below their issue prices. Investors are cautious of making position in government companies because of the general elections," Abhijeet Bajpai, co-founder, Avighna Trades, said.

And if the markets correct due to elections and adverse monsoon effect, these shares would fall more in the near future, he said.

But it's not that these companies are weak or poorly run.

If we analyse financials of last three years, RVNL is growing at 30% in revenues and 20% in profit.

"With Rs 77,000 crore of order book and government focus on rail infrastructure spends, strong execution capabilities and robust balance-sheet, the stock looks promising and investors should hold for long-term pick," he said.

LACKLUSTRE SHOW

• RVNL listed at Rs 19, the upper end of the price band, on Thursday and remained there the whole day
   
• Garden Reach Shipbuilders, which makes defence ships and vessels, got listed at 12% discount in October at Rs 104