A large-cap railway company’s share price ascended from ₹ 27.40 to ₹ 48.30 or by 76.28 percent in a span of four months. The stock got listed on the bourses in January 2021 and witnessed a flat listing. In fact, it grew sideways until October 2022, giving no significant returns to its investors. However, it has recently turned a multibagger after a massive rally in a short span of time.
The company’s share price climbed 61 percent to ₹ 34.50 apiece until December 2022 (from ₹ 21 per share earlier) and then took a downturn. It started to hover around its IPO price (₹ 22 to ₹ 25) until the end of March 2023, after which it witnessed a massive rally of 76.28 percent.
Over the last five trading sessions, Indian Railway Finance Corporation (IRFC’s) shares gained a whopping 35.48 percent to reach a record high of ₹ 48.30 apiece on the National Stock Exchange (NSE).
The rally in its share price has come on the back of significant block deals which took place on the counter on Thursday, leading to its biggest single-day rally of 12 percent.
IRFC borrows funds from the financial markets to finance the acquisition/creation of assets which are then leased out to the Indian Railways as finance leases.
Last week, the company announced that it has signed a Memorandum of Understanding (MoU) with RITES Ltd to strengthen cooperation in financing and development of railway infrastructure projects. The MoU will also contribute to the overall growth and modernisation of the Indian Railways, the company said.
Market experts observed that momentum builds when railway stocks start moving. Everyone jumps on the bandwagon. Though it is a dangerous situation, it is a reality.
In an interview with CNBC TV-18, expert Ambareesh Baliga said that at current levels, IRFC is fully priced and that he has been advising his clients to book profits at current levels.
IRFC’s share price escalated from ₹ 21.30 to ₹ 48.30, delivering multibagger returns of 126.76 percent. Therefore, if an investor had invested in the company’s shares a year ago, the value of their holdings would have been ₹ 2.26 lakhs today!
With a market capitalization of ₹ 58,416 crores, IRFC is a large-cap company. It has a low return on equity of 14.66 percent and a very high debt-to-equity ratio of 9.21. Its shares were trading at a price-to-earnings ratio (P/E) of 9.21, which is lower than the industry P/E of 11.77, indicating that the stock might be undervalued as compared to its peers.
The company’s promoters hold an 86.36 percent stake in it, followed by Retail investors with 10.48 percent, other domestic institutions with 1.25 percent, foreign institutions with 1.14 percent and mutual funds with 0.77 percent.
Written by Simran Bafna
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