IRCTC Doubles Over IPO Price In Best India Listing In Two Years
Commuters and passengers disembark from a train in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)  

IRCTC Doubles Over IPO Price In Best India Listing In Two Years

Shares of Indian Railway Catering and Tourism Corporation Ltd. more than doubled on their first day of trade, the best debut for a local company in two years, driven by a strong demand for its offering.

The stock listed at Rs 644 apiece—a premium of 101 percent over its issue price of Rs 320 a share—on the BSE Ltd. Thereafter, the scrip closed over 13.12 percent higher to Rs 728.6.

That’s a good listing and especially coming from a state-run company, it’s a good sign for the markets, said Siddhartha Khemka, vice president and head of research at Motilal Oswal Financial Services Ltd. He expected the company to list at a 50-60 percent premium.

The Rs 644-crore initial public offering received demand for 111.95 times the shares on offer, according to exchange data. That made it the most sought after issue by subscription since Apollo Micro Systems Ltd. and Amber Enterprises India Ltd. went public in January 2018 with a demand for more than 150 times.

IRCTC’s offer is also the biggest and the most successful among the four railway companies that have gone public.

“The core business of IRCTC is almost like a monopoly,” Khemka said.

The company’s core business is spread across four verticals — railway catering, tourism services, online ticketing and packaged drinking water. It is the only authorised firm by Indian Railways to offer these services in trains.

It also has two private trains under it. One of them — the Lucknow-Delhi Tejas express — is operational and running at an average occupancy level of 60 percent. The break-even for running this train is at an occupancy level of 70 percent, Mahendra Pratap Mall, chairman and managing director of IRCTC, told BloombergQuint. “However, this is a lean period and performance during the festive season will be important. At 90 percent occupancy levels, we can generate margins in the range of 12-15 percent.”

About the new service charges introduced, Mall said the company won’t share the revenue from that with the Indian Railways. “Going by the current trend of ticket bookings, the service charges levied could add up to Rs 320-350 crore in FY20 and for the next year, it can add up to Rs 650 crore to the revenue.”

Starting Sept. 1, the company started levying a service charge of Rs 15 on tickets booked for non-air conditioned coaches and Rs 30 for air-conditioned compartments. That would add a substantial portion to the company’ earnings.

Brokerages had given a positive outlook on the company’s issue on the back of strong financials. ICICI Direct and Anand Rathi had recommended ‘subscribe’ to the issue at offer price.

IRCTC’s earnings per share as of March comes to Rs 17. At the upper end of the IPO price band of Rs 315-320 apiece, price-to-earnings ratio stands at 18.8 times its FY19 estimates, according to BloombergQuint’s calculations.

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