Must know things before applying IRCTC HOT IPO – review, allotment, subscription, gmp , (Apply or Not?) etc

irctc-ipo-book-ticketing-review-gmp

IRCTC IPO Issue Details:

IPO date:                      30 Sept – 03 Oct 2019
Issue Size:                    645 Cr
Offer Price:                  Rs 315 – Rs 320 Per Equity Share
Market Lot:                  40 Shares & multiples
Retail discount:          Rs 10 per equity share
Employee discount:   Rs 10 per equity share
Exchange Listing:       BSE, NSE

Imp Note: The retail application is through UPI mode only.

IPO Timelines (tentative dates):

Allotment & refund:    10 Oct
Credit to Demat:           11 Oct
Listing on Exchange:   14 Oct

Company Promoters: The President of India acting through the Ministry of Railways

Objective of the Issue: To carry out the disinvestment of Equity Shares

IPO Registrar: Alankit Assignments Ltd

Company Overview:

  • Incorporated in 1999, Indian Railway Catering and Tourism Corporation (IRCTC) is a subsidiary of the Indian_Railways that handles the catering, tourism and online ticketing operations of the Indian railways.
  • IRCTC is the only entity authorized by Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India.
  • Its tagline is “Lifeline of the nation
  • The company website: www.irctc.co.in

Business Operation:

The company operates majorly in four segments:

    1. Internet Ticketing
    2. Catering Services
    3. Packaged Drinking Water (under ‘Rail Neer‘ Brand)
    4. Travel and Tourism

IRCTC Ltd IPO Analysis (Review):

Financial Performance:

IRCTC_ipo_financials

valuations as on 31st Mar 2019:

1. Earning per share (EPS): 17
2. Price to Earning ratio (P/E): 18
3. Price to Book value: 5

Company category:  slow-grower

Company Strength:

  • Only authorized entity to book online Railway tickets and even other apps such as paytm, makemytrip etc. book the railway tickets but only through the IRCTC route (IRCTC login).
  • Higher entry barrier and virtual monopoly in segments as only authority entity. Also, e-Ticketing in India in gaining every year due to smartphones and Jio revolution.
  • IRCTC has recently restored service charges on online train ticket booking from September 2019 which was stopped in 2016. Because of this in year 2020, there could be increase in revenue and profit of IRCTC.
  • IRCTC has scope and plans of capacity increase of packaged drinking water “Rail Neer” expansion across India and so improve the profit in the segment too.
  • Privatization of Indian railways such as “Tejas Express” completely belongs to IRCTC and the train going to commence operations in October 2019.
  • Modernization of Indian railways and stations will open new opportunity avenues to IRCTC as an early bird entity.
  • Cheapest fare in domestic religious tours.

Company Risks:

  • Passenger traffic growth has remained flat over the past four years
  • National Highways are getting better and better, air convenience and extension of airline connectivity have impact on shifting of people preferences from Railway to other options. 
  • The government announced huge outlay for Indian Railways in their recent budgets but the reality says government has shortage of funds as recently borrowed money from RBI for revival of banking and finance of economy.
  • Private sector participation in Indian Railways has recently started as like many other developed countries.
  • Though they have the monopoly in catering, packaged water and tickets segments but the tariff charges are under the control of Indian railways.
  • Government interference such as during 2016, govt removed the charges IRCTC levy on passengers booking railway tickets online as service charge
  • Certain government programs or projects may be subject to delays, extensive internal processes, policy changes, and changes due to local, national and internal political forces, such as periodic elections at Central and State level, insufficiency of Government funds or changes in budgetary allocations of Government entities

Field Analysis:

  • Privatization. According to a railway board document, as reported by The Times of India, the government is “seriously” planning to rope in private players to run passenger trains on low congestion and tourist routes.
  • Shifting of people preferences from Railways to other options such as air, metro, highway routes.
  • IRCTC tour packages are cheapest and good only limited to religious travels. For recreational purposes or holidays, IRCTC tours are not a good choice as very poor service such as average hotels, unfriendly staff, breakfast issues, 1/2 star hotels, pathetic itinerary, missed sightseeing as per people reviews on mouthshut.com

Peer Comparison:

There is no direct listed peer.

Analysis Conclusion:

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  • virtual monopoly as only authorized entity in the segments, recently restored service charges on e-Booking, Owned private train IRCTC Tejas Express are major plus.
  • Also, The Grey Market Premium (GMP) as of 29th September is around 150 with positive sentiment of people for the IPO are in favor of the IPO.
  • Major concerns are flat passenger traffic, slow financial growth, government interference and shifting of people preferences from railway to other options such as air.
  • Considering all the factors, my personal say is “APPLY for Listing Gain“. Expecting bumper listing of the ipo.
  • Note: I am going to apply to the IPO.

BullRun IPO-India Ratings:  4 stars out of 5 stars

Analysis video link: https://youtu.be/Shr4NXNMArw

IRCTC IPO allotment check:

IRCTC IPO subscription status:

irctc_ipo_subscription_figures_3rd_oct

Sources:

https://www.irctc.co.in
https://www.irctctourism.com/
https://en.wikipedia.org/wiki/Indian_Railway_Catering_and_Tourism_Corporation
https://en.m.wikipedia.org/wiki/Tejas_Express
https://www.livemint.com/news/india/irctc-railway-train-ticket-booking-gets-costlier-know-the-charges-1567395421757.html
https://www.livemint.com/news/india/india-s-first-private-train-irctc-delhi-lucknow-tejas-express-is-here-see-pics-1568612604569.html
https://www.quora.com/How-good-are-irctc-tourism-packages
https://www.mouthshut.com/product-reviews/IRCTC-Tour-Package-Mumbai-reviews-925106914
https://www.mouthshut.com/websites/Irctctourism-com-reviews-925735980

Abbreviations:

EPS – Earning per share
IRCTCIndian Railway Catering and Tourism Corporation
OFS – Offer for Sale
P/E – Price to Earning
RoE – Return on Equity
QIB – Qualified Institutional Buyer
NII – Non-Institutional Investors
RII – Retail Individual Investor
Disclaimer & Conflict of Interest:

The above analysis is based on study of the company and RHP of IRCTC. You should study more before taking any decision.

Analysis by –  NISM Certified Research Analyst & Investment Advisor.

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