#39;Subscribe to IRCTC IPO for listing as well as long-term gains#39;

October 02
09:33 2019

Rudra Shares and Stock Brokers

Indian Railway Catering and Tourism Corporation (IRCTC) has been a profitable and a debt-free company since incorporation and its return on equity has exceeded 23 percent for each fiscal year since 2017. From September 1, 2019, the company started levying a service charge of Rs 15 on tickets booked for non-air conditioned coaches and Rs 30 for air-conditioned ones. The move will add a substantial portion to the company’s earnings.

It is in the process of introducing various new products and services, for instance IRCTC iMudra, i-Pay and is also developing payment services.

IRCTC’s revenues for the FY19 increased 25 percent to Rs 1,956.7 crore from Rs 1,569.56 crore in the previous fiscal primarily due to an increase in catering services revenues. It generated 54.99 percent of income from railway catering in FY19. Driven by increase in profit, return ratios increased too. ROE & ROA for the FY19 increased to 27.3 percent and 11.1 percent.

IRCTC enjoys a monopoly in many of the services it provides. It is the exclusive provider of online railway ticketing, catering services and packaged drinking water for trains and stations. It is in the process of setting up water plants and 10 new pantry cars by FY20.

Having a unique business model, IRCTC enjoys a monopoly and has no competition. The company has strong financials, diversified business segments, and is debt free. All these factors make the stock attractive.

In an upper price band of Rs 320, with EPS at Rs 17.04 for FY 19, the stock is available at a P/E ratio of 18.8x which looks very attractive. We recommend to subscribe the IPO for listing as well as long-term gains.

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