IRCTC Enters Stock Market with a Bang

November 26, 2019 | Mayank | The Big Picture

Indian Railway Catering and Tourism Corporation or as we know it IRCTC is usually considered as a smartphone application mostly used for booking train tickets and ordering food on train. But what if we tell you it’s not just that and IRCTC is a PSU known for one of the most stellar debuts in stock market? Yes, you read that right. On 30th September 2019, IRCTC held an initial public offering (IPO) on the National Stock Exchange and the IPO got an oversubscription of 112 times. The base price of the shares was set between Rs. 315 and Rs. 320 per share but on 14th October 2019, the day when the listing went live, the share price opened at Rs. 625 and Rs. 646 on NSE and BSE respectively. IRCTC became the only PSU to deliver 100 plus listing day gains, which makes IRCTC listing the most successful entry of a PSU enterprise in the equity market.

Why?

As a part of disinvestment strategy for many Public Sector Units (PSUs), the government decided to offload the part of government equity in Railway PSUs. Other than IRCTC, the Rail Vikas Nigam Limited, IRCON, the Indian Railway Finance Corporation, and the engineering services company RITES are Railway PSUs. According to the Budget 2017, government wanted to offload 25% stake in rail PSUs, including IRCTC. Through the IPO, the government has offloaded 12.6% stake and it has reduced Indian Railway’s shareholding in the company to 87.40%.

As per the listed value of the shares, this offloading of stakes was supposed to garner around Rs 645 crore but by the end of the offer period up to October 3, the issue was oversubscribed 112 times. This made IRCTC the most subscribed among Public Sector Undertakings in the stock markets ever.

Where will the Money Go?

As it was a part of government’s disinvestment strategy, all the money will go to the government and not to the IRCTC.  The government may use this money in funding infrastructure in the country and this is one of the ways government meets the target.

The government needs money for a variety of reasons, including funding infrastructure in the country. Disinvestment is one of the many ways in which the government meets that target.

IRCTC and its Task

IRCTC is a subordinate of Indian railways and it takes care of the catering, tourism, and online ticketing operations of the latter. It handles around 5.5 lakhs to 6 lakhs bookings every day and on some special occasions this data goes up to 15 to 16 lakhs.

Other than online ticketing, and e catering services IRCTC helps in booking air tickets and offers luxurious tourism alternatives like Charter trains, Hill railways, and tourist specific trains. It also caters magnificent holiday packages including international packages and domestic air packages. IRCTC also helps you booking hotels for your trip with its IRCTC Hotels section. If this is not enough, IRCTC also has a section known as Rail Drishti which helps you in getting information about the status of not only your PNR number and booking status but also the status of your complaints, status of your consignment. Contractors can also check the status of tender through IRCTC.  Also, IRCTC operates the Lucknow – New Delhi Tejas Express which had its inaugural service on 4 October 2019 and is the first privately operated long-distance train in India.

So, the Railways are going Private?

One-word answer for this question is NO. No, the railways are not being privatised because Indian railway is still the largest stake holder in IRCTC and other Railway PSUs.

According to railway minister Piyush Goyal,

 “There is no question of privatisation of the Railways. The Railways cannot be privatized. However, if we must increase the facilities in Railways, we obviously need investments for it. We have taken a decision to encourage public private partnerships and we will also corporatize some units”.

It will be interesting to see if IRCTC’s initial public offering move works in the favour of the government’s disinvestment strategy because the initial trends are looking incredibly positive as the base prices which were Rs. 315 and Rs. 320 per share for NSE and BSE respectively are now trending as the stock prices of Rs. 886.95 and Rs. 886.90.