The Indian Railway Catering and Tourism Corp. Ltd (IRCTC) stock hit a new 52-week low of ₹520.05 on Thursday, having lost 23% of its value in the past year.
This performance contrasts sharply with the Nifty PSE index, of which IRCTC is a part, which has gained 19% during the same period. In other words, the stock has underperformed the index by 43 percentage points.
While the one-year performance is disappointing, a more worrying development for investors is that the stock breached its nearly three-year low of ₹557 earlier this month, a level last seen on 29 March 2023.
Valuation puzzle
The key question now is whether the sharp underperformance has made the stock cheap relative to its earnings growth.
Based on PL Capital’s FY28 earnings estimates, the stock trades at a price-to-earnings (P/E) multiple of 25x, significantly lower than its historical median P/E of around 45x.
However, the brokerage expects single-digit earnings growth of 9% and 8% for FY27 and FY28, respectively—hardly exciting for investors.
This results in a PEG ratio (P/E divided by growth) of nearly 3x, which still appears expensive given that the preferred range is typically between 1x and 2x.
Growth concerns
The potential for upside surprises to FY27 and FY28 earnings estimates appears limited, given the company’s lacklustre performance in the nine months ended December (9MFY26).
Since IRCTC generates a sizeable portion of its profits from other income, analysts consider operating Ebit (excluding other income) a better gauge of underlying profitability.
On this basis, Ebit rose 10.2% year-on-year to ₹1,278 crore in 9MFY26.
The internet ticketing segment contributed 75% of total Ebit during this period.
Investors had been hoping that non-ticketing segments—catering, tourism and Rail Neer—would drive additional growth, but that expectation has not yet materialized.
The catering segment’s Ebit remained flat at ₹207 crore in 9MFY26.
Reports suggest that the business could face further pressure in Q4FY26, as an LPG shortage is impacting IRCTC’s base kitchens, where meals are prepared before being loaded onto train pantry cars.
As a result, FY26 catering Ebit may remain similar to FY25 and FY24 levels of around ₹270 crore each year.
The tourism segment performed better, with Ebit (adjusted for exceptional income) rising 64% year-on-year to ₹72 crore in 9MFY26.
However, this growth was partly supported by an unusually weak base in 9MFY25, when Tejas Express trains, used for luxury and religious tour packages, reported operating losses.
Ticketing backbone
IRCTC’s overall Ebit growth could accelerate if the high-margin internet ticketing segment gains momentum.
The segment enjoys Ebit margins of over 80% and has two revenue streams:
- Convenience fee from online ticket bookings
- Non-convenience fee income from advertising and ancillary services such as food orders and travel insurance.
Within this segment, the non-convenience fee component is the bright spot.
While convenience fee revenue rose just 2.5% year-on-year to ₹742 crore in 9MFY26, non-convenience fee income surged 22.4% to ₹403 crore, driven by higher advertising revenue and loyalty income from co-branded credit cards with leading banks.
Internet ticketing provides earnings stability for IRCTC and limits downside risks, given the company’s monopoly in railway ticket bookings.
PL Capital has a ‘Buy’ rating on the stock with a target price of ₹850, which implies 40x its FY28 estimated earnings per share.
However, muted earnings growth appears to be the key reason investors have stayed away from the stock.
As IDBI Capital Markets & Securities noted in its Q3FY26 results review, “With strong monopoly position, healthy margins, cash generation and visible growth pipeline, the stock looks a Buy for long-term investors, though near-term volatility may continue.”