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About IRCTC Limited
It is a Central Public Sector Enterprise 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. They are
incorporated with the 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. They were conferred the status of Mini – ratna (Category-I Public
Sector Enterprise) by the Government of India, on May 1, 2008.
Currently, they operate in fits business segments, namely, internet ticketing, catering,
packaged drinking water under the “Rail Neer” brand, and travel and tourism.
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Who are the Company Promoters? Taxation (111)
This is owned by Govt of India. The President of India acting through the Ministry of
Railways is the promoter of this company.
1) Company revenues are at Rs 1602.8 Crores for the year ended Mar-17 and Rs 1,956.6
Crores for the year ended Mar-19.
2) Company profits are Rs 229 Crores for the year ended Mar-17 and Rs 272.5 Crores for
the year ended Mar-19.
3) Its FY2019 EPS is Rs 17.04 and last 3 years average EPS is Rs 15.5.
2) NIIs – up to 15%
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Every investor should understand the company’s key strengths so that one can compare
with its competitors to know how unique is such company in their business. Their
investment decision would change based on these facts. Here are the key strengths of the
company.
4) Exclusively authorized for manufacturing and supplying packaged drinking water at the
railway station and trains.
– Complaint Monitoring
Company strategies would help investors to know what company is intending to do in the
future and whether these strategies would help in revenue or margin growth. Such
information would help investors to decide whether to invest for short term, medium
term or for the long term. Here are the company strategies.
1) Diversifying and offering new services to the passengers of Indian Railways and others
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Investors can consider these factors to invest in this IPO.
1) IRCTC is the only service provider to Railways for online ticketing, catering services,
etc., and it is monopoly.
3) Employees of IRCTC and Retail investors would get Rs 10 discount on IRCTC IPO Price.
These risk factors can impact company revenue and margins which would affect its share
price. Investors should go through and understand these risk factors before investing.
1) Its business and revenues are substantially dependent on Indian Railways. Any adverse
change in the policy of the Ministry of Railways may adversely affect its business and
results of operations.
2) They are the sole provider of online railway ticketing, catering services, and packaged
drinking water for trains and stations, and certain other services they provide; if the
Government were to allow open competition in all or any of these areas, it may impact
its financial results.
3) Indian food service industry and package water industry have both historically been
fragmented and unorganized, lacking sufficient reliable industry data. As such, any
attempt to analyze the relevant data on catering and packaged drinking water market
competition and industry trend may be incomplete or unreliable.
Other risk or negative factors that are indicated in the RHP Prospectus.
1) Company and its Directors are involved in certain legal and other proceedings.
2) Its Auditors have included a matter of emphasis in relation to its Company in the
Restated Financial Statements.
3) They have been unable to make consolidation of its financial statements in the
absence of audited accounts of its joint venture, Royale Indian Rail Titss Limited
4) Its business can be negatively affected if they are unable to maintain quality standards.
5) They rely on information technology to operate its internet ticketing and tourism
business and maintain its competitiveness; any failure to adapt to technological
developments or industry trends could harm its business.
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6) They are exposed to risks associated with online security, the security of its customers’
personal information and credit card fraud; failure to manage these risks may expose us
to litigation, liability and damage to its reputation and brand image.
7) They rely on awareness of its brand to build its customer base and grow its revenues.
Any failure to maintain or enhance consumer awareness of its brand could have a material
adverse effect on its business, financial condition and operation.
9) Its travel and tourism and packaged water segments experience seasonal fluctuations
due to periodic local and national elections, weather changes as well as holidays; as
such, quarterly financial data comparisons may not be meaningful.
10) For complete internal and external risk factors, you can refer the IPO RHP of the
company.
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IRCTC IPO Price Band is Rs 315 to Rs 320. If we consider its EPS for last year FY2019 of Rs
17.04 on the higher price band of Rs 320 the P/E works out to be 20.6x. If we consider its
EPS for the last 3 years of Rs 15.5 on the higher price band of Rs 320 the P/E works out to
be 18.8x. Means the company is asking the higher price band of Rs 320 at P/E between
18.8x to 20.6x. There are no listed peers to compare, hence we cannot say whether IRCTC
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Limited share price is under priced or overpriced. However 20x P/E looks reasonable in
IRCTC IPO Valuation.
Company revenues have grown in the last 3 years. It has earned consistent margins of
around 14% on revenue in the last 3 years. It is a monopoly in its business. However, in
future Govt can allow competitors in such business. Considering all these factors, one can
invest in this IPO for 3 to 5 years tenure. Owing to current volatile market conditions,
one may or may not get listing gains.
Disclaimer: The information in this article is for educational purpose only. This is not a
recommendation to invest or NOT to invest in this IPO. Please consult your investment
advisor before you invest in such high risk IPOs.
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more meaningful analysis in the coming IPOs.
Suresh KP
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One comment
One comment
Sugumar iyer
September 27, 2019 at 3:51 pm
The premium appears to be unjustified. On one side Govt is exiting many public sector
undertakings. The present step may be for the same purpose. The monopolistic status is hiding
the inefficiency and may not be continuing as govt policies are capitalistic oriented. The share
price may not sustain in the current economic scenario.
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