IRCTC makes grand debut, doubles over issue price; should you book profit?

Shares of Indian Railway Catering and Tourism Corporation (IRCTC), the online ticketing, tourism and the catering arm of railways, made a stellar debut on the bourses by listing at Rs 644, a 101 per cent premium over its issue price of Rs 320 per share on the BSE. Since retail investors received shares at a discount of Rs 10 per share, for them the issue price stood at Rs 310 per share.

At close, the stock price stood at Rs 728.60 apiece on the BSE, up around 128 per cent. 

The state-owned company raised Rs 645 crore through its initial public offer (IPO). The issue got huge response from all categories of investors. The IPO was subscribed a massive 112 times. The retail category was subscribed nearly 15 times while qualified institutional buyers (QIBs) segment got subscribed 109 times and non-institutional investors (NIIs) category 355 times.

IRCTC is the only entity authorised by Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India.

Most brokerages had ‘subscribe’ rating on the IRCTC. The company is likely to benefit from monopolistic nature of business, significant growth over FY19-21, an asset-light business model with healthy dividend payouts, and strong parentage,  analysts at Motilal Oswal Financial Services (MOFSL) had said. READ ABOUT IT HERE

"IRCTC is in steady business model, which is likely to grow at 12-15 per cent in the next few years. The restoration of convenience charges for e-ticket from September 2019 is likely to generate additional annual revenue of Rs 450 crore. The company has healthy balance sheet with over Rs 1,100 crore cash to support capex. It has good dividend pay-out track record, as it paid around 50 per cent average payout in the last 3 years, Reliance Securities had written in an IPO note. 

Should you book profit?

Analysts appear divided on the investment strategy as regards the stock. Some feel IRCTC is a good long-term investment bet given its unique business model and monopoly in the business it operates and hence, advice investors to stay invested. Others, however, feel one should get over the listing euphoria as the bumper listing was expected owing to phenomenal oversubscription of the offer and thus, retail investors, who got allotment in the IPO, should utilise this opportunity to exit.

"One should not be in a hurry to exit. The stock price may not shoot up from here significantly but it is a good long-term investment bet," said Ambareesh Baliga, independent market analyst. 

On the other hand, Sudip Bandyopadhyay, group chairman at Inditrade Group of Companies, says listing euphoria was expected given the bumper over subscription the IPO received. "My suggestion to the value investors would be to just stay on the sidelines and watch the stock price movement... where it settles in a day or two and then take a call. As far as small investors are concerned, may be it's a chance to exit," Bandyopadhyay added.  

What does this mean for other railway stocks? 

IRCTC is a standalone story and it won't have any impact on other railway stocks because the company operates in a completely different space. Hence, it cannot be compared to Titagarh Wagons and Texmaco Rail, Baliga said.