MUMBAI : Shares of Indian Railway Catering and Tourism Corp. Ltd (IRCTC) surged nearly 128% on BSE from their issue price on Monday, the biggest stock market debut for any company in nearly two years.

The initial public offering (IPO) of state-run IRCTC, the sole provider of catering services and online bookings for Indian Railways, was subscribed 112 times at a price band of 315-320. The 645-crore issue was open for subscription between 30 September and 4 October.

The stock opened 101.25% higher above the issue price of 320 at 644. It jumped 132% to touch a high of 743.80 and a low of 625 during the day, before closing at 728.60, an increase of 127.68%.

This is the biggest listing gain for any stock since Astron Paper & Board Mill Ltd made its debut with gains of 139.40% on 29 December 2017. Earlier in the same year, Salasar Techno Engineering Ltd had jumped 151.94% on the day of listing, and Avenue Supermarts Ltd surged 114.30% on listing.

In 2019, a dozen stocks debuted on the stock exchanges. Of them, only four fell on their listing day. Among the others, Indiamart Intermesh Ltd, Neogen Chemicals Ltd and Polycab India Ltd had listing gains of 33.87%, 22.58% and 21.75% respectively.

IRCTC is the only entity authorized by Indian Railways to provide catering services, and sell railway tickets online and packaged drinking water in railway stations and trains.

In the last two fiscal years, it clocked 10.3% annual growth, with revenue rising to 1,868 crore in FY19. However, its profit margin fell to 13.9% in FY19 from 14.3% in FY17 on higher expenses.

Graphic: Mint
Graphic: Mint


The company has high return ratios, with return on capital employed and return on equity of 25% and dividend payouts of more than 40% of net profit, over the past two years, higher than the regulatory norm of 30%. Healthy cash balances, which are more than the net worth of IRCTC, provide comfort against business uncertainties, said analysts.

“Based on FY19 consolidated numbers, the issue is priced at a price to earnings (PE) of 19 times. The company is likely to benefit from monopolistic nature of business, significant growth over FY19-21, an asset-light business model with healthy dividend payouts, and strong parentage," Motilal Oswal Financial Services Ltd said in a 28 September note.

Irctc.com is one of India’s most-visited websites with seven million daily log-ins. From 1 September, the company has reinstated a convenience fee of 10-30 per booking on its web and mobile platforms. Since it handles 2.5 crore transactions a month, this has an incremental revenue potential of 300-900 crore, according to the management.


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