Rail Vikas Nigam Ltd. (RVNL) is a wholly owned Government Company, a Miniratna (Category – I) Schedule ‘A’ Central Public Sector Enterprise. RVNL is a project executing agency working for and on behalf of MoR (Ministry of Railways). It undertakes rail project development, mobilization of financial resources and implementation of rail projects pertaining to strengthening of golden quadrilateral and port connectivity coupled with raising of extra-budgetary resources for project execution. The role of RVNL is to mobilize finances and is restricted to forming of project specific SPVs with private participation.

Outlook & valuation: In terms of valuations, PE works out to 7x FY18 EPS of `2.77 (at the upper end of the issue price band), which is reasonably priced considering (a) healthy order book with near and long term execution visibility, (b) highly capable and experienced management coupled with asset light business model, (c) healthy dividend payout ratio around 30% in last three years, (d) diversified revenue segment, and (e) increasing revenue opportunity from railways due to new investment in electrification and infrastructure. Given that RVNL is an executing agency of MoR, we believe it is in a sweet spot to tap the upcoming opportunities in Indian Railways. On the basis of the above arguments, we recommend SUBSCRIBE to issue.

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