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Share of Indian Railway Catering & Tourism Corporation (IRCTC) were trading more than 13% higher at 933 per share on the BSE in Thursday's early deals as the stock trades ex-split today. The record date has been set as October 29, Friday for the sub-division of equity shares of 10 each into five equity shares of 2 each.

While announcing its first quarter earnings, IRCTC had unveiled its stock split plans as the board approved the proposal for a 1:5 stock split, i.e., for a split of 1 share at a face value of 10 each into 5 equity shares at a face value of 2 each. 

"While IRCTC is a fundamentally strong stock but the current valuations are very high even after the recent fall in the stock price. Existing investors should keep holding their stocks while new investors should wait for the valuation to correct before taking any new position," said Divam Sharma, Co-founder of Green Portfolio, SEBI registered Portfolio Management Services.

The Indian Railways' PSU stock has been in a continuous run of giving stellar return to its shareholders since listing in October 2019. The stock split will help enhance liquidity in the capital market, widen shareholder base and make the shares affordable to the small investors, it had said.

“With IRCTC being fundamentally strong on its monopoly, the stock is also technically looking strong as it is taking support near the previous breakout. Investors can buy the stock as the reduced price will make it look cheaper, hence, creating demand for the stock," said Manoj Dalmia, Founder, and Director- Proficient Equities Limited.

The state-owned company entered the primary markets by listing in October 2019 and enjoys a strong monopoly. It has 100% market share in rail network. It’s also the only entity authorised to manage catering services on trains and major static units at railway stations.

A stock split increases the number of shares that are outstanding by issuing more shares to the current shareholders. Stock split decreases the market price of the individual shares, however, does not result in changing the market capitalization of the company.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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