IPO ANALYSIS

Analyst -
Sai Krishna U V
18BM60098
IRCTC Financial Outlook
IRCTC, incorporated on Sept 27,1999 – Under Subsidiary Indian Railways governed by Ministry of Railways
Miniratna status by Govt in 2008

IRCTC is diluting 12.6% equity to raise 635.5 Cr(@Rs315/- Lower Band) ~ 635.5 Cr(@Rs320/- Upper Band) fund
by selling 20,160,000 shares

How is 12.6% equity split?

50% - Institutional buyers
35% - Retail public – up to Rs 1.98L shares (640Shares or 165lots) @Rs 315-320/-
with 10Rs discount @Rs305-310/-
15% - HNI’s - high network individuals
0.79% - employees quota
IRCTC Revenue from Operations
- 4 major verticals of IRCTC

1535Cr 1470Cr 1867Cr

Key Players Revenues analysis

Revenue 2018-19
1899 Cr Revenue - Sales 25% inc - profit grew 25+%(~27%) …
55% @1045Cr Catering - Improved Quality is gaining more passengers to eat with IRCTC

23.3% @444Cr Travel n tourism - New Generations has affinity to t-ravel with high disposable income

12.35% @234Cr Internet booking (enjoys monopoly) – Reintroduced convenience fees from Sept.
Rs 15/- Non AC and Rs 30/- for AC
For BHIM Rs 10/- Non AC and Rs 20/- for AC
with 1.5~1.8Cr transactions per month.. It’s a good Source of revenue ~350+Crs per year
(may be to get a good evaluation)
also people are shifting to e-ticketing 55%currently

8.28% @176Cr Rail Neer - more margins this year on as plants commissioned are doubled to 20
Market share projections to increase to 80%.. Currently @40%
Projected Revenue from Major Contributors
IRCTC Fundamental Analysis

Operating margin 20%+

Revenue decrease in FY18 is due to
convenience fee waived off
PAT 15% (projected CAGR -- 20%+ next 4 yrs)
ROE 26% ROA 11.1% ROCE 31.9%
Dividend payout ratio has increased from 37% FY17 to 44.89% FY19
EPS 17/- dividend paid – 7.6/-
P/E ratio – 18.8
 SWOT
S
enjoys Monopoly in core businesses, has business diversification in e-catering, executive lounges, budget hotels
55% Revenue from catering and it is the only entity authorised to provide services like food, water, tickets
Completely debt free company in balance sheet and has cash
ROE 27% and ROCE 32%
Attracts heavy web traffic in Asia Pacific region – Revenue from Adv. (Other Income)
W
Dependent on Indian Railways
PSUs are not valued much eg - SBI,Coal India
Security of Data is not standard

O
New gen has disposable income so has tendency to spend more
likely to buy more travel packages and also if quality is improved then would favour IRCTC services

T
withdrawal of exclusive contracts / Government were to permit open competition will impact revenue badly
Pilot project where private players are running on some routes
If private investments are happening and public like it then a treat
Technology upgrades are likely investment in private
 Valuation parameters

• 24th September Red herring submitted

• Evaluated at 5020Rs valuated market capitalisation

• Net Worth in 2019 – 1043 Cr

2018 – 955 Cr
2017 – 787 Cr

• PE ratio 18.8

• 2018-19 PAT 272.5Cr

PBT 430Cr i.e. 36.5% effective Tax Paid
but new rate is 25.17%

• Considering YoY growth rates is PBT is 516Cr so PAT 386Cr

• For Rs 1/- earning, investors are ready to pay 18.8Rs/- for Rs 386 Cr earning how much would it be valued at ?
• 386*18.8=7256Cr~ valuated.. So 44% appreciation
 Recommendation - Buy
What When How ?
For Retail
Open to Subscribe from Oct 1-3rd 2019
Oct 9th - Final basis allotment
Oct 10th Removes block on margin fund
Oct 11th Credits to Dmat account
Oct 14th Listing on NSE and BSE
To Subscribe for an IPO
Need to have an UPI account
with Rs 12400/- which shall be put on Hold
Approve the hold in UPI Mandates option in bank’s UPI app
(will not debited unless shares are allocated)

10 Rs discount per retail customer

i.e. price is 305/- lower band and 310/- upper band

1Lot – 40shares – 12400/- (after applying 10/- discount per share)

In my opinion, Low risk high reward

In the long term scenario
75% will be held by promotors so expecting one more public offering in next 7-10 years