IRCTC share listing has become a dream come true for investors of the PSU initial public offer (IPO) issue. Those investors/traders who have held the shares till date are sitting on a gain of 198% in just 18 days. Bids were invited in a price band of Rs 315 to Rs 320 during the IRCTC IPO which was held from September 30 to October 3.
The allotment of shares for the initial public offer (IPO) of IRCTC was held from October 9 to October 10. Those who were lucky enough to bag a pie of 2.01 crore shares on offer have enjoyed the rise of stock in 18 days.
The Indian Railway firm made its market debut on October 14 with IRCTC share listing at Rs 644 on BSE and Rs 626 on NSE against the issue price of Rs 320.
Against the listing price of Rs 644, the IRCTC stock made an intraday high of Rs 743.80 on both the bourses, with 15.50% intraday gain clocked on the BSE, and 18.80% hike against the listing price on NSE.
The stock has been on an upward trajectory since then. From the issue price of Rs 320 per share, the stock moved to an intra day high of Rs 953.65 on Friday (October 25) translating into 198% return for investors on BSE. The stock has delivered a 52.31% return to the listing price of Rs 644.
Similarly, on NSE, the stock hit an intra day high of Rs 953.50 on the NSE delivering 197% return compared to the issue price of Rs 320. The stock has given a 52.31% return to the listing price of Rs 626 on NSE. Market capitalisation of IRCTC share hit Rs 15,000 crore on Friday compared to Rs 10,736 crore on the listing day.
The IPO received bids for 225.39 crore shares compared to the issue size of 2.01 crore shares. The public issue was a part of the government's divestment programme for the financial year 2019-20.
The government which owned 100% in IRCTC sold 12.6% stake in the firm. After the IPO, government's stake in the firm fell to 87.4%. The issue involves sale of 2.01 crore equity shares of face value of Rs 10 each in a price band of Rs 315 to Rs 320. The attractiveness of the firm's business can be gauged from the fact that IRCTC enjoys monopoly across its area of operations and is backed by the government.
These factors have helped the stock of the firm attract strong investor interest till date.
"IRCTC has a unique business model and the company does not have any competition across any business segment. Based on various parameters like strong earnings profile, diversified business segment, healthy return ratio, debt free status." Anand Rathi said in a note.
IRCTC is the sole licence holder for catering and online ticketing for the Indian Railways and is exclusively authorised to manufacture and supply packaged drinking water at stations and in trains. The market share of packaged drinking water at railway premised and trains are expected to increase to approximately 80 per cent from nearly 45 per cent as the number of plants will increase from 10 to 20 by CY21.
"Recent tax reduction by government to 25.2 per cent and increase in revenue from service charge for online ticketing will improve profitability substantially going forward. There is also significant opportunity for the company to ramp up the catering business given a very large captive audience which is currently being underserved," a note from Angel Broking said.
From September 1, 2019, Ministry of railways has permitted the company to charge Rs 15 for Non- AC and Rs 30 for AC ticket booked online.
If tickets are booked through BHIM or UPI charges are Rs 10 & Rs 20 for Non-AC and AC, respectively, which is big positive for the government firm, Angel Broking added.
Reliance Securities which had a positive view on the IRCTC IPO said, "The company has a healthy balance sheet with over Rs 1,100 crore cash to support capex. IRCTC has a good dividend pay-out track record, as it paid 50% average payout in the last 3 years. Assuming moderate revenue growth of 10% compounded annual growth rate (CAGR) through FY19-21E, the company is valued at 13 times FY'21 estimated earnings, which appears to be justified considering its business model, steady growth and healthy return ratios."
IRCTC is engaged in internet ticketing, catering, packaged drinking water and travel and tourism. IRCTC has also diversified into other businesses, including non-railway catering and services such as e-catering, executive lounges and budget hotels.