A State-Run Company Just Delivered India’s Best Trading Debut in Two Years

Indian Railway Catering & Tourism Corp. doubled on the first day of listing, the best debut for a local company since 2017

Watch | IRCTC Chairman Mahendra Pratap Mall On The Company’s Future Plans

(Bloomberg) -- Indian Railway Catering & Tourism Corp. more than doubled on the first day of trading, the best debut for a mainboard listing since 2017, after its public float emerged as the most sought after for the nation’s state-run firms.

Lured by IRCTC’s monopoly status, investor demand exceeded shares on offer by 112 times, eclipsing the government-owned Housing & Urban Development Corp. and Cochin Shipyard Ltd., whose maiden offerings were oversubscribed more than 75 times in 2017, a record year for Indian IPOs.

The company garnered 6.43 billion rupees ($91 million) for the government, which sold 20.1 million shares, or a 12.5% stake, in a price band of 315-320 rupees apiece. IRCTC’s IPO is also the biggest and the most successful among the four companies from the Indian Railways stable that have gone public.

Key Insights

  • The company’s core business is spread across four verticals -- railway catering, tourism services, online ticketing and packaged drinking water. It is the only authorized firm by the Indian Railways to provide these services in trains.
  • Catering service is the largest contributor to IRCTC’s top line and the company controls about half the bottled water sold on stations.
  • Even so, it is internet ticketing that adds the most to its bottomline. About three-quarters of 1.4 million people who traveled by train daily in the April-to-August period booked tickets online.
  • “It is a unique IPO as most of IRCTC’s businesses are a monopoly,” said Abhimanyu Sofat, head of research at Mumbai-based IIFL Securities Ltd. “There are future levers of growth in terms of the fee charged on the ticket booking and packaged drinking water.”
  • Starting Sept. 1, the company has resumed charging a fee on tickets booked online, which is expected to add 4.5 billion rupees to revenue annually, said Arafat Saiyed, analyst at Mumbai-based brokerage Reliance Securities Ltd.

Market Reaction

  • IRCTC’s shares surged as high as 743.8 rupees, compared with the offer price of 320 rupees, and closed at 727.8 rupees. The 127% premium d the company at about $1.65 billion.
  • Before today, Astron Paper & Board Mill Ltd. surged about 142% on listing in December 2017.
  • Here are some of the top gainers among mainboard IPOs over the past two years.
group> class="news-rsf-table-string" /> class="news-rsf-table-number" /> class="news-rsf-table-string" /> class="news-rsf-table-number" />
CompanyOffer Price (Rs.)Debut Gains (%)
Avenue Supermarts299114
Central Depository14975
HDFC AMC1,10065
Dixon Technologies1,76664
AU Small Finance Bank35851

Get More

  • The stellar response may help bolster the government’s drive to raise a record 1.1 trillion rupees ($14.8 billion) selling state firms this financial year, though not all share sales will elicit a resounding response.
  • “IRCTC is an exception because of the quality of businesses it offers,” IIFL’s Sofat said. “This can’t be said for every government company.”
  • IRCTC’s debut is a bright spot in India’s IPO market that has seen 11 issuers raise a little over 100 billion rupees in the first nine months of the year, the fewest issuers since 2014, according to PRIME Database. That compares with about 310 billion rupees raised via 24 public floats in 2018.
  • More than 20 companies shelved IPO plans this year, thanks to the general election in May and as the lingering crisis in the nation’s credit market damped risk appetite.

©2019 Bloomberg L.P.

This Article is for
NDTV Profit Exclusive Users”
Subscription starts @ ₹48/week
SUBSCRIPTION BENEFITS
Exclusive Stories
Research Reports
Webinars & Events
BQ Journalism
Exclusive Newsletters
Minimal Ad Experience
Sign Up to read
this article for
You're almost there, what are you waiting for?
SUBSCRIPTION BENEFITS
Exclusive Stories
Research Reports
Webinars & Events
BQ Journalism
Exclusive Newsletters
Minimal Ad Experience
You have reached your
FREE stories limit
Subscription starts @ ₹48/week
SUBSCRIPTION BENEFITS
Exclusive Stories
Research Reports
Webinars & Events
BQ Journalism
Exclusive Newsletters
Minimal Ad Experience
Access denied!
Get live Stock market updates, Business news, Today’s latest news, Trending stories, and Videos on NDTV Profit.
GET REGULAR UPDATES