IRCTC shares will get listed on both BSE and NSE
IRCTC shares will get listed on both BSE and NSE

IRCTC IPO sees strong retail demand: Key things to know before you invest

  • Retail investors applying for IRCTC shares get a discount of 10 per share
  • The maximum number of IRCTC shares retail investors can bid in this IPO is 640 or 16 lots

IRCTC IPO saw strong demand as the issue opened for subscription on Monday. As the end of Day 2, the issue was nearly 3.25 times subscribed, buoyed by strong retail demand. Many analysts have also recommended "subscribe" to IRCTC IPO, citing valuation comfort. The issue closes for subscription on 3rd October. Though this IPO in state-run IRCTC, the government is offloading 2 crore equity shares or 12.6% stake, which will bring down its stake to 87.4%.

The price band of 640 crore IRCTC IPO has been fixed at 315-320 per share but retail investors and eligible employees would be offered a discount of 10 per share. IRCTC is the only entity authorised by Indian Railways to provide catering services to railways, online railway ticketing service and packaged drinking water at railway stations and trains in India.

Alankit Assignments Limited is the registrar to the IRCTC IPO.

IRCTC IPO Price Band

Price band per share is 315-320. Retail investors and eligible employees get a discount of 10 per share. So the effective price band of IRCTC IPO for retail and eligible employees is 305-310 per share.

IRCTC IPO allotment date and listing date

The tentative date of allotment of IRCTC shares is 9th October.

IRCTC shares will get listed on both BSE and NSE and tentative date of is 14th October.

Lot size of IRCTC IPO

The lot size or minimum order quantity is 40. So at the effective price band of 305-310 per share for retail investors, they have to shell out 12,200-12,400 per one lot.

IRCTC IPO – retail portion

35% of the IRCTC IPO has been allocated for the retail portion. Retail investors are allowed to bid up to 2 lakh shares. The maximum number of shares retail investors can bid is 640 or 16 lots at lower price band ( 1,95,200) as well as 640 or 16 lots at upper price band ( 1,95,200-1,98,400).

Other Details About IRCTC

The company operates in four business segments: internet ticketing (12.4% of topline), catering (52.9%), sale of products including packaged drinking water under the “Rail Neer" brand (11.1%), and travel and tourism (23.5%).

IRCTC is also venturing as a private train operator as the Railways opens key routes to private operators.

IRCTC reported a net profit of 272.6 crore in FY19, up from 220.6 crore in FY18. The company's revenue grew to 1,867 crore in FY19 from 1,470 crore in FY18.

IRCTC has restored service charges on online train ticket booking from September 2019. The charges are 15 per ticket for non-AC and 30 for AC classes.

Risk factors

A change in policy of Ministry of Railways could impact the financials of IRCTC while competition could pose a risk to its monopoly position, say analysts.

What Analysts Say On IRCTC IPO

Jimeet Modi, founder & CEO of SAMCO Securities & StockNote, recommends subscribe to the IRCTC IPO, citing reasonable valuations and earnings visibility.

“One should subscribe to IRCTC’s IPO given the reasonable valuations at 19 times earnings, an asset light model and high earnings visibility," he said.

ICICI Securities recommends subscribe to the IRCTC offer issue at the offer price, citing recent reduction in corporate tax rate, inclusion of convenience fee on railway tickets and the company’s plans to set up 10 water plants in next two years.

The brokerage also cites IRCTC’s healthy dividend payout (45% in FY19) and RoE (26.1%) and reasonable valuation among other positive factors. “The stock is available at a price to earnings multiple of 10x (FY21E EPS), which we believe looks attractive from the perspective of future earnings growth," ICICI Securities said.

Another brokerage Angel Broking also recommends subscribe to the IRCTC IPO. The recent corporate tax cut and an increase in revenue from service charge for online ticketing will improve profitability substantially going forward, says the brokerage.

IRCTC also has a significant opportunity to ramp up the catering business while increasing business volumes from catering and packaged drinking water businesses, along with service charge for online ticket booking will drive earnings growth for the company, Angel Broking said.

Canara Securities, which has a subscribe rating to the IRCTC IPO issue, says the company has taken many profitable initiatives including running first private train starting, advertising bids and proposed 10 Rail Neer plants that may generate positive cash flows.

Prabhudas Lilladher has recommended a subscribe on IRCTC IPO, saying that the issue looks attractive due to limited competitive risks, and expected margin swing from revenue windfall with re-introduction of service charge.