The government's 2% share sale offer in Indian Railway Finance Corporation (IRFC) received a subdued response from institutional investors on Wednesday, with the issue failing to get full subscription. According to PTI, institutional investors placed bids for over 22.34 crore IRFC shares, which is 94.98% of the over 23.52 crore shares on the block. At an indicative price of ₹104.12 per share, institutional investors put in bids for about ₹2,326 crore. The offer price has been fixed at ₹104 per share, representing a discount of about 4.5% to yesterday's closing price of ₹109.40. The government plans to divest up to 4% of its stake in the company - 2% as the base offer and an additional 2% through the green shoe option, which may be exercised if needed. However, as reported by CNBC TV18, the government has chosen not to exercise the oversubscription option, limiting the stake sale to the base 2% offer. The portion reserved for non-retail investors was subscribed 95% on Wednesday, according to data on the BSE, with the government deciding not to exercise the oversubscription option since there was undersubscription of 1.48 crore equity shares.
Retail investors largely ignored the government's offer for sale in IRFC, with only a fraction of the reserved shares being bid for on the final day. According to The Economic Times, against 3.79 crore shares reserved for retail investors, bids were received for around 5.9 lakh shares on Thursday, the last day of the two-day issue. Following market hours on Wednesday, the government chose not to invoke the green-shoe option in the OFS, citing the undersubscription. This tepid retail participation contrasts sharply with the strong institutional response, where institutional investors had placed bids for 22.34 crore shares, translating to a subscription of 94.98% of their allocated category. The floor price for the OFS is set at ₹104 per share, taking the total OFS size to ₹2,326 crore through the sale of 2% equity. The offer opened for non-retail investors on February 25, while retail investors could bid on February 26. The Economic Times reports that the base offer size comprises up to 261.4 million equity shares, representing 2% of the total paid-up equity share capital, with the oversubscription option allowing the sale of an additional 26.14 equity shares.
Under the OFS structure, over 26.137 crore equity shares of the company will be offloaded, with an option to sell additional 26.137 crore shares under the oversubscription option. As reported by CNBC TV18, out of this, 3.79 crore shares, or 14.52% of the total offer will be available for retail investors when subscription opens on Thursday, subject to receipt of valid bids. The floor price for the OFS is set at ₹104 per share, taking the total OFS size to ₹2,326 crore through the sale of 2% equity. The offer opened for non-retail investors on February 25, while retail investors can bid on February 26. The floor price of ₹104 is lower than the previous closing price of ₹109.40, indicating the government is offering shares at a discount to attract investor participation. This pricing strategy reflects the government's approach to maximizing divestment proceeds while maintaining market accessibility for investors. If the greenshoe option had been fully exercised, the issue size could have touched ₹5,400+ crore, making it one of the larger divestments in recent months. The Economic Times reports that the base offer size comprises up to 261.4 million equity shares, representing 2% of the total paid-up equity share capital, with the oversubscription option allowing the sale of an additional 26.14 equity shares. Goldman Sachs Securities is acting as the sole broker for the OFS, as confirmed in the latest filings.
IRFC shares closed at ₹104.56 per share on Wednesday, February 25, which is 4.46% lower than the previous close of ₹109.40 per share, as reported by CNBC TV18. The stock ended nearly at the same level as the OFS floor price set by the government. During the day, the counter swung between ₹106.20 and ₹104.40 per share. The stock advanced around 1% to its day's high of ₹105.30 on Thursday, February 26, ahead of the retail portion opening. The stock's performance has remained under pressure over the past year, with the multibagger railway stock falling 17% so far in 2026 and 15% in a year. However, according to Mint, the stock has offered multibagger returns of 275% and 318% in three and five years respectively, according to NSE data. Analysts view the OFS as more of a regulatory necessity than a genuine market event, with the public shareholding in IRFC required to be greater than 25% as per SEBI norms. The current promoter holding of 86.36% will decline to 82.36% post the OFS, which could lead to more selling pressure in the future. As reported by Bonanza, the OFS floor price is close to the 52-week low levels, offering little opportunity for retail investors to participate. Analysts recommend that retail investors should approach this opportunity with pragmatism, as the OFS does not offer a specific retail discount, reducing the "margin of safety" compared to buying directly from the secondary market.
The stake sale will reduce the government's holding in IRFC from the current 86.36% to 82.36% after completion of the share sale. As reported by The Times of India, The Economic Times, and Upstox, the government could raise approximately ₹5,430 crore if the full 4% stake is divested. As of December 31, the Government of India held an 86.36% stake in IRFC, and the stake sale forms part of the Centre's broader divestment and minimum public shareholding compliance strategy. The company's strong quarterly results where net profit rose 10.51% year-on-year to ₹1,802 crore for the third quarter ended December 2025, marking the highest-ever quarterly profit reported by the company, support the government's decision to monetize its stake in the railway financing major. IRFC remains a strong proxy for Indian Railways' growth as it finances almost all rolling stock and infrastructure projects, with the government's broader target of raising significant funds through PSU stake sales this fiscal.
IRFC is undergoing strategic evolution following the IRFC 2.0 plan, which aims to shift from the traditional one-client model (Ministry of Railway) to a multi-client model encompassing the broader railway ecosystem and strategically linked infrastructure sectors. According to Bonanza, they have a 60:40 target by FY30, wherein 60% of the AUM will come from traditional Indian Railways leasing, while 40% derive from higher margin opportunities in the broader railway ecosystem. This strategy has led to the expansion of the Net Interest Margin (NIM) to 1.51% in Q3FY26, which is the best NIM performance in 3 years, as highlighted by Bonanza. IRFC CMD Manoj Kumar Dubey stated that sanctions for the full financial year will range between ₹80,000 crore to ₹90,000 crore, with the company having already surpassed its disbursement and sanctions guidance for the full year. The company's operational metrics continue to support its position as a key player in India's railway financing ecosystem, with assets under management rising to a record ₹4.75 lakh crore as of December 31, 2025. As of December 31, the company currently enjoys a market capitalisation of ₹1,36,631.23 crore and is a constituent of BSE 200 index.
