D-Street's bullet train: IRCTC climbs league table to be most-valued PSU

Gravity-defying rally in shares of Indian Railway Catering and Tourism Corporation (IRCTC) has helped the railway ticketing company climb the league table for the most-valued public sector undertaking (PSU). 

In the past 10 trading sessions, shares of the state-owned company have shot up more than 50 per cent. Currently, IRCTC ranks 23 in terms of the most-valued PSUs, with a market capitalisation (m-cap) of more than Rs 24,000 crore. At the time of its initial public offering (IPO) in October 2019, it didn’t even feature in the top 50. 

Currently, it is valued more than other marquee PSUs, such as The New India Assurance Company, Bharat Electronics, Oil India, and Bharat Heavy Electricals.

In the past fortnight, IRCTC has seen its m-cap swell by over Rs 10,000 crore — more than the combined market value of the bottom 20 listed PSUs. 

On Wednesday, shares of IRCTC closed at Rs 1,509, up 6.8 per cent over the previous day’s close and 52 per cent over its January 23 close of Rs 995.

The rally would be music to the ears of the government, which holds 87.4 per cent stake in the company. 

IRCTC made its stock market debut in October last year. Shares of the company were priced at Rs 320 in the IPO. The stock had soared 2.3x on listing day itself, breaking the record for the highest gain on debut.

The latest jump in shares of IRCTC comes a week ahead of its December quarter result announcement. 

Market players say investors need to be cautious, as the company’s valuations have reached lofty levels. At the current market rate, the stock is valued at nearly 80x its trailing 12-month earnings. 

Analysts at Prabhudas Lilladher believe the company will be able to log a compound annual profit growth rate of a whopping 49 per cent between 2018-19 and 2021-22 (FY22). According to the brokerage, the stock is valued at a reasonable level of 20x and 18x its projected earnings estimate for 2020-21 and FY22, respectively. 

“IRCTC is a monopolistic entity authorised to provide packaged drinking water, catering, and online ticket booking services to passengers travelling by Indian Railways. It has a dominant position in online rail bookings and packaged drinking water. Being a regulated monopoly acts a strong moat and limits competitive risks,” said the brokerage in a note.