The initial public offering (IPO) of Indian Railway Catering and Tourism Corporation (IRCTC), the catering, ticketing and tourism arm of the Indian Railways will open for subscription on 30 September. The Government of India is looking to sell 12.6 percent stake in the entity through this offer for sale (OFS), reducing its total share to 87.4 percent.
This is the fourth public offering from a state-owned Railway company after Rail Vikas Nigam, RITES and Ircon.
- The issue opens for subscription between 30 September and 3 October.
- Issue size: 20,160,000 equity shares aggregating Rs 628 crore to Rs 638 crore.
- Face value: Rs 10 per equity share.
- Issue price band: Rs 315 to 340 per share.
- Lot size: 40 shares and multiples of 40 shares thereof.
- Minimum and maximum lots to be subscribed: 1 to 15 lots (40 to 600 shares)
- Employee reservation: 1,60,000 shares
- To be listed on: BSE and NSE
- Listing date: 14 October
- Book running lead managers: IDBI Capital, SBI Capital Markets and Yes Securities
- Registrar: Alankit Assignments
IRCTC was incorporated exactly 20 years ago on 27 September 1999 as a central public sector enterprise wholly owned by the Indian Government and under the control of the Ministry of Railways.
It currently has four business segments:
1. Internet ticketing: It is the only entity authorized to sell tickets to travel on trains run by the Indian railway tickets. www.irctc.co.in is one of the most transacted websites in Asia-Pacific region.
Apart from a dedicated website, IRCTC also has a mobile app (Rail Connect) that offers online ticket booking.
2. Packaged drinking water: It is the manufacturer and distributor of packaged drinking water on trains and railway stations under the brand name "Rail Neer."
3. Catering: IRCTC provides food on running trains from kitchens owned, operated and managed by it.
Recently, it also introduced an e-catering app service to deliver food from hotel chains at the nearest stations to travellers. It has tied up with 500+ restaurants and allows rail passenger to choose meals from the menu over the app and place order by entering travel details such as PNR number, Train name and seat/berth number.
4. Travel and tourism: The entity provides tour packages, air ticket and hotel bookings. It also allows its portal users the option to avail travel insurance for a nominal amount of 49 paise per passenger while booking train tickets.
Promoter: The Ministry of Railways.
Financials: For the financial year 2018-19, IRCTC reported a 25 percent rise in total sales revenue by 25 percent to Rs 1,957 crore and profit grew by 23.5 percent to Rs 272 crore from the previous year.
Payment gateway: In March 2019, it launched IRCTC iPay, its digital payment gateway to pay for its services online, eliminating the need for a third party platform to process domestic payments via credit card, debit card, UPI, etc.
It also launched its eWallet scheme that its app or website users can use to book rail tickets.
Delhi-Lucknow Tejas Express: It is the first train that will be managed solely by IRCTC as part of the Indian Railways bid to privatize some of its trains.
Should you subscribe to IRCTC IPO?
Dalal Street Investment Journal has placed "50 (invest with limited exposure)" rating on the IPO and said that the issue price is "reasonable."
"What is good for the company is high entry barrier where the company is operating. IRCTC has the monopoly in the industry. Moreover, the company is generating cash of around Rs. 655 crore every year, which is likely to increase with the imposition of service charge from September 1st," the IPO analysis report said.
It also pointed out that the company has been consistently paying dividends to its shareholders with dividend payout at 45 percent.
DSIJ recommended a "subscribe the issue with long term investment horizon" review "considering the company's strong cash generation, higher entry barrier to business with reasonable valuation."