IRCTC shares subscribed 112 times; highest for a state-owned company

Online railway ticket booking platform Indian Railway Catering and Tourism Corporation (IRCTC) got a resounding response to its maiden share sale, on Thursday. The issue garnered bids worth over Rs 70,000 crore, against the Rs 640 crore worth of shares on offer.

The 112x subscription was the highest for an initial public offering (IPO) of a state-owned company, bolstering the Centre’s drive to raise nearly Rs 1 trillion through disinvestments in the remaining half of the fiscal year. Even on an overall basis, the subscription was the highest in 18 months for an IPO.

Most analysts had advised their clients to subscribe to the listing, citing the company’s unique business model and attractive valuations.

The institutional investor portion of the IPO was subscribed over 100 times, the high networth individual (HNI) portion subscribed 355 times, and the retail investor portion around 15 times.

Market players said many HNI investors have placed leveraged bets, in anticipation that the stock would jump more than 30 per cent on the listing day.

The price band for the issue is Rs 315-320 per share. At the top end, the company will be valued at Rs 5,120 crore. Through the IPO, the government aims to divest 12.6 per cent stake in the company.

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

The company had reported net profit of Rs 273 crore on revenues of Rs 1,868 crore, in FY19. At Rs 320, the company was valued at nearly 19 times its FY19 earnings per share (EPS) of Rs 17.

In the past two years, IRCTC has improved its finances through utilising the website for advertising, data monetisation, e-auctioning, and retail management. It has seen an increase in revenue from its catering business, as well as from the sale of its Rail Neer brand of bottled water.

“Inclusion of convenience fee on railway tickets, setting up of 10 water plants in the next two years, and the recent announcement of reduction in corporation tax bodes well for EPS growth, besides the healthy dividend payout (45 per cent in FY19) and return on equity (26.1 per cent),” said a note by ICICI Direct.

The brokerage said that based on the earnings projection for the next financial year, the stock was valued at a price-to-earnings multiple of just 10x.