New Delhi: Growth of Indian Railway Catering and Tourism Corp. Ltd. (IRCTC) depends on continued support of its parent, the Indian Railways, according to the draft prospectus of the subsidiary's initial public offering.
IRCTC is wholly owned by the Centre and comes under the administrative control of Indian Railways. It earns a fee on every train ticket it sells online and manages the catering of the food served in trains. It plans to launch its initial public offering (IPO) on 30 September.
The proposed IPO is expected to see the government sell stake worth ₹635-645 crore through an offer for sale. The government aims to offload 20.16 million shares in IRCTC via the IPO. The government’s stake will come down to a little over 87% after the stake sale. The company will not raise any fresh money. IRCTC, after discussion with merchant bankers, has set the price band for its IPO at ₹315-320 per share.
The company’s business and revenue is heavily dependent on railway ministry’s policies. For instance, if the government orders the national transporter to offer discount to passengers on tickets or remove any levy, it will impact IRCTC’s revenue.
Currently, IRCTC is the sole provider of online railway ticketing, catering and packaged drinking water services. While Indian railways’ latest plan to rope in private players to run trains, which will cater to the larger idea of providing world-class service to passengers, it will also create competition for IRCTC, which in turn may impact the company’s revenue.
IRCTC’s plan to launch the IPO comes immediately after a sharp turnaround in Indian stock markets after the government cut corporate tax on Friday.
Several firms had seen IPO approvals lapse in the past few months because of volatile stock markets as a result of slowing economic growth, the US-China global trade war and rising crude prices.
IRCTC’s business is divided into four segments—internet ticketing, catering, sale of packaged drinking water under the ‘Rail Neer’ brand, and travel and tourism. Its sales rose 25% to ₹1,899 crore and profit 23.5% to ₹272.5 crore in fiscal 2019 over the previous year, its draft red herring prospectus filed with regulators in August said.