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IRCTC IPO – How good is this IPO?

(i) IRCTC ( Miniratna PSU ) is a wholly-owned by the Government of India and under the administrative control of the Ministry of Railways. They are the only entity authorized by Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India.

(ii) IRCTC was formed with an objective to upgrade, modernize and professionalize catering and hospitality services, managing hospitality services at railway stations, on trains and other locations and to promote international and domestic tourism in India through public-private participation

(iii) Currently, IRCTC operates in four business segments, namely, internet ticketing, catering, packaged drinking water under the “Rail Neer” brand, and travel and tourism.

(iv) Revenue contribution from different verticals.

Particulars( in cr) 2019 2018 2017
Internet Ticketing 234 207 469
Catering 1044 740 398
Packaged Drinking Water (Rail Neer) 176 169 159
Travel and Tourism 444 403 528
Total 1898 1519 1554

(v) Under the Catering Policy 2017, IRCTC benefits from a monopoly position in many of the services they provide to the customers. In particular, they are the exclusive provider of online railway ticketing, catering services and packaged drinking water( Rail Neer ) for trains and stations.

WhatsAppFacebookTwitterEmailObjects of the IRCTC IPO:

The objects of the Offer are: (i) to carry out the disinvestment of 20,160,000 Equity Shares by the Selling shareholder constituting 12.60% of  paid-up Equity Share capital IRCTC (ii) To achieve the benefits of listing the Equity Shares on the Stock Exchanges. The company will not receive any proceeds from the Offer and all proceeds shall go to the Selling Shareholder.

DRHP of IRCTC IPO

RHP of IRCTC IPO

IRCTC IPO Details:

Open Date: Sep 30 2019
Close Date: Oct 03 2019
Total Shares: 20160000
Face Value: ₹ 10 Per Equity Share
Issue Type: book building
Issue Size: 645 Cr.
Lot Size: 40 Shares
Issue Price: ₹ 315-320 Per Equity Share
Retail Discount: 10
Listing At: NSE,BSE
Listing Date: Oct 11 2019

Promoters And Management:

The govt. of India is the promoter of IRCTC.

Financials of IRCTC IPO:

(fig. in cr)

Year Revenue EBITDA OPM PAT NPM Shares EPS
2017 1602 380 23.7% 229 11.4% 4.000 14.3
2018 1569 372 23.7% 220 10.9% 4.000 13.8
2019 1956 461 23.6% 272 13.5% 16.000 17.0

IZ View 1. The company is steadily growing in the last 3 years in term of Revenue and PAT. 2. The company has very good EBITDA margins of above 20%. 3. The company has an asset-light model and it is a debt-free company. 4.  The Mcap at higher band of Issue price is ~ 5100 Cr. The Mcap/Sales multiple is 2.61x.( reasonable). 5.  The P/E multiple at higher band of issue is ~18x.( reasonable ). 6. The company has excellent RONW of 26% based on FY19 financials.

Comparison With Peers:

As on the date of this Red Herring Prospectus, there are no listed companies in India which are engaged in the same line of business as our Company and comparable to our scale of operations, hence comparison with industry peers are not applicable.

Recommendation on IRCTC IPO:

Review and Recommendation of InvestorZone is:  6/10 1.  The IRCTC has a monopoly business as it is the only authorized dealer for catering, ticket booking, and water bottles supply in Indian railways to the passengers. 2. They are one of the most transacted websites, www.irctc.co.in, in the Asia-Pacific region with transaction volume averaging 2.5 to 2.8 cr transactions per month. 3. The IRCTC is regularly giving very good dividends. Final Dividend during 2018-19:- INR 22.20 per share, F.Y 2017-18 INR 11.80 per share and F.Y 2016-17 INR 18.86 per share, including Interim Dividend paid during the year F.Y 2018-19 INR 3.75 per share and F.Y 2016-17 INR 9.38 per share. 4. The Valuation at P/E multiple of 18x looks reasonable. 5. The reduction in corporate tax to 25.17% will help the company as they are currently paying 34.99%. Moreover, they have started charging a convenience fee from Sept 2019 to Rs. 15 for Non-AC and 30 for AC which will help improve the bottom line in FY19.

Lead Manager of IRCTC IPO:

  1. IDBI Capital Market Services Limited
  2. SBI Capital Markets Limited
  3. Yes Securities (India) Limited

Registrar of IRCTC IPO:

  1. Alankit Assignments Limited
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