IRCTC: Govt withdraws decision to share convenience fee; shares recover 34%

ICICI Securities in a note said that, this would straight away reduce revenues and earnings before interest and tax (EBIT) by 14 per cent and 36 per cent respectively

Shares of Indian Railway Catering and Tourism Corporation (IRCTC) clocked a sharp intra-day recovery after the Ministry of Railways withdrew the decision which said half the revenue that accrues to the company through the convenience fee on train tickets will go to the Ministry of Railways.

At 11:27 AM, the shares were trading at Rs 873 per share, down 4.5 per cent on the BSE, recovering 34.per cent from the day's low of Rs 650 (down 29 per cent).

The move, had it been implemented, would have straight away reduced revenues and earnings before interest and tax (EBIT) by 14 per cent and 36 per cent respectively, said a note by ICICI Securities.

The stock trades in the futures & option (F&O) segment, which has no circuit limits. A total of around 890,000 shares had changed hands on the NSE and BSE in early trades with pending sell orders for 23.74 million shares, the exchanges data showed.

 "Ministry of Railways vide letter dated October 27, 2021 (received on October 28, 2021) has conveyed its decision to share the revenue earned from convenience fee collected by IRCTC in the ratio of 50: 50 w.e.f November 1, 2021," IRCTC said in a exchange filing on Thursday after market hours.

According to IRCTC’s annual report, it earned Rs 299.13 crore from the convenience fee (also called service charge) during 2020-21. These gains were lower owing to the fall in railway ticket bookings after the pandemic came. IRCTC had earned Rs 349.64 crore in 2019-20.

Officials in the know told Business Standard IRCTC’s management would meet on Friday to figure out a strategy to safeguard revenues. CLICK HERE FOR FULL REPORT