RailTel shares surge 22% in 3 sessions; here’s why

Shares of RailTel Corporation of India continued gaining streak for the third straight session on Monday after the state-owned company bagged three orders worth nearly ₹600 crore last week. The share price of PSU telecom company has risen more than 22% in the three trading days, despite weakness in the broader market.

On Monday, RailTel shares opened higher at ₹369.40, up 5.3% against the previous closing price of ₹350.70 on the BSE. In the early trade, the PSU stock gained as much as 7.8% to ₹378, while the market capitalisation rose to ₹11,520 crore.

At the current level, RailTel shares trade 23% lower than its 52-week high of ₹491.15 touched on February 28, 2024. However, the midcap stock has risen nearly 300% from its 52-week low of ₹96.20 hit on March 28, 2023. In the calendar year 2024, shares of RailTel gave a flat return of 2% as the stock witnessed correction after hitting its all-time high in February. In the last one month, the counter lost nearly 8%, whereas it gained 66% in the past six months.

In an exchange filing on March 17, RailTel Corporation, which provides broadband and VPN services, informed exchanges that it received the work order worth nearly ₹352 crore from Municipal Corporation of Greater Mumbai. The contract involves supply, installation, testing, commissioning, operations & maintenance of HMIS for the health department of BMC.

A day before, on March 16, the telecom company bagged another contract worth ₹130.60 crore from State Project Director (SPD) Bihar Education Project Council (BEPC) for the supply of teaching-learning material for class I to V under rate contract.

Besides, RailTel secured another worth ₹113.46 Crore from Odisha Computer Application Centre (OCAC), as per the exchange filing on March 14. As per the contract, the company will establish an IP-MPLS network connectivity in Odisha under OdishaNet Phase 1.0.

Adding to it, ICRA also upgraded long term rating on RailTel and revised outlook to ‘Stable’ from ‘Positive’. The stable outlook reflects ICRA’s expectation that RailTel will likely sustain its operating income growth, supported by a strong order book position, even as the margins are likely to witness a decline.

“The upgrade in the long-term rating of Railtel Corporation of India factors the healthy growth in the operating income and sustenance of its strong financial risk profile, supported by zero debt and a healthy liquidity position,” it said in a report released on March 4.

ICRA expects the company to continue demonstrating healthy growth in operating income, aided by its robust order book position of around ₹4,900 crore as of January 2024. The rating also factored in Railtel’s strong liquidity position, bolstered by its sizeable cash and liquid investments (including fixed deposits) of ₹600 crore, as on September 30, 2023.

Established in September 2000, Railtel, a Miniratna PSU under the Ministry of Railways, has a long track record of operations in the fibre optic network, providing broadband and multimedia services, along with modernisation and maintenance of the communications network of the Indian Railways. The company owns 61,000 km of optical fibre network to provide long-distance services, including internet and passive infrastructure services,  across the country.  

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