IRCTC Limited IPO coming soon, 5 things to know

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The public offer of Indian Railway Catering and Tourism Corporation (IRCTC) is planned to be launched soon, reports Financial Express. Citing sources with knowledge of the matter, the publication added that IRCTC Limited IPO could be launched in the coming Navratri season. Since the auspicious season begins from 29 September, the IPO could be launched towards the end of September or early October 2019 (more about IRCTC IPO).

Here are five things to know about IRCTC Limited IPO:

#1 All OFS issue

IRCTC IPO will involve sale of up to 2 crore (20 million) shares by the government which is currently the sole owner in the PSU. Following the IPO, the government’s equity stake in the company is set to drop to 87.5%. Since all the shares will be offered by the government, the company will not get any funds fro the IPO.

#2 Pricing and valuations

The company filed its draft prospectus in August and hasn’t received SEBI approval so far. As such, pricing of the offer isn’t decided yet. However, according to media reports, the government is believed to raise anywhere between INR500 and 600 crore from IRCTC Limited IPO.

This means that the IPO is likely to be priced in the range of INR250 – 300 per share. The company’s Earnings Per Share (EPS) for FY2019 stood at INR17.04. As such, the pricing translates to a Price by Earnings (P/E) ratio of 17.64. For the aforesaid year, its Return on Net Worth (RoNW) stood at 26.14%.

#3 Miniratna with a busy website

IRCTC is the only entity authorized by Indian Railways to offer railway tickets online. According to the draft prospectus, IRCTC’s website www.irctc.co.in is among the most transacted websites in the Asia-Pacific region. The company’s website and mobile app ‘Rail Connect’ have transaction volume of more than 25 million per month and 7.2 million logins per day. IRCTC was conferred the status of Miniratna (Category-I Public Sector Enterprise) by the government in May 2008.

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#4 Business Operations – Ticketing, Catering, Water, Travel and Tourism

Internet Ticketing and Catering are the biggest money spinners for IRCTC and the former generated as much as 30% of IRCTC’s revenues in FY2017. However, this contribution declined in subsequent years amid a surge in Catering revenues which grew from INR398.6 crore in FY2017 to 1,044.5 crore in FY2019. Apart from on-board catering services, IRCTC offers catering services at stations through Jan Ahaar kiosks.   

Under Travel and Tourism segment, IRCTC offers hotel bookings, rail, land, cruise and air tour packages and air ticket bookings. This segment contributed 23.4% of IRCTC’s revenues in FY2019.

IRCTC also offers packaged drinking water under the ‘Rail Neer’ brand and operate 10 plants with an installed production capacity of approximately 1.09 million litres per day, which caters to approximately 45% of the current demand of packaged drinking water at railway premises and in trains. This segment contributed 9.3% to IRCTC’s topline.

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#5 Financial performance

IRCTC’s financial performance is on a solid footing. Revenues and profits have increased in the last three years while margins have been steady at roughly 14%. The company monopoly in its business areas and a debt-free balance sheet are the factors helping its healthy margins.

At the same time, it is subject to policy interventions from the government. This was clearly visible when the government withdrew the service charge on internet ticketing in November 2016. Although the government reimbursed lump sums of INR80 crore and INR88 crore for FY2018 and FY2019, respectively; it nevertheless impacted RCTC’s revenues. With effect from 1 September 2019, the company has reintroduced the service charges, albeit at lower rates.

IRCTC’s financial performance (in INR crore)
FY2017 FY2018 FY2019
Total revenues 1,602.9 1,569.6 1,956.7
Total expenses 1,247.8 1,223.9 1,526.7
Comprehensive income 231.1 224.8 272.9
Net margin (%) 14.4 14.3 13.9

Krishna Bagra

Coming from a family of investors and financial analysts, Krishna learnt wading through regulatory filings pretty early in her career. At IPO Central, Krishna plays twin roles of contributor and head of research desk. She can also be reached at +krishnabagra .

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