IRFC Shares Tumble 4% after Govt Begins ₹5,436-Cr Stake Sale

Shares of Indian Railway Finance Corporation (IRFC), the financing arm of the Ministry of Railways, dropped up to 4% on Wednesday, hitting an intraday low of ₹105.05 on the BSE, after the government announced plans to sell around a 4% stake in the company.

The stake sale is being carried out through an Offer for Sale (OFS). The issue opened for non-retail investors on Wednesday, while retail investors can place their bids on Thursday.

The government has set a floor price of ₹104 per share. At this price, the total size of the OFS works out to about ₹5,436 crore for a 4% stake sale. Notably, the floor price is nearly 5% lower than Tuesday's close of ₹109.44 and about 2.2% below Monday's closing level.

Under the OFS, the government will first sell 2% of its stake, which equals over 26.13 crore shares. It also has the option to sell another 2% stake if demand from investors is strong. This additional portion is known as the "green shoe" or oversubscription option.

The government has appointed global investment bank Goldman Sachs as the sole broker to manage the share sale.

The stake dilution is aimed at meeting minimum public shareholding (MPS) norms. Currently, the government holds 86.36% in IRFC and as per market regulations, all listed companies must have at least 25% public shareholding within five years of listing.

To meet this requirement, the government will eventually need to reduce its stake in IRFC by about 11.36%.