Indian Railway Catering and Tourism Corporation (IRCTC) IPO has turned out to be blockbuster, as the issue was subscribed 112 times as at the end of last day of bidding.
Indian Railway Catering and Tourism Corporation (IRCTC) IPO has turned out to be blockbuster, as the issue was subscribed 112 times as at the end of last day of bidding. The Rs 645 crore IRCTC IPO received bids for 225 crore shares, as against the total issue size for 2.01 crore, implying a subscription of more than 112 times. The retail investor category saw bids for more than 14 times the issue size, while NII’s bid for more than 355 times the portion reserved for them. The employee category received bids for 5.76 times their reserved portion. The QIBs bid for a 109 times their alloted portion. Through the IRCTC IPO, the government looks to raise up to Rs 645.12 crore at the higher end of the price band.
Various brokerages had advised investors to subscribe to the issue. Sharing key strengths of the railway PSU, IndiaNivesh said that IRCTC enjoys monopoly business in online rail ticket booking and food catering on running trains. “Mobile application based food ordering is gaining fast traction among travellers. It provides multiple caterers in tune with today’s taste and preferences of commuters,” said the research firm. Further, the issue offers attractive prospects as IRCTC has strong fundamentals and debt free balance sheet along with decent return ratios. The ROE stands at about 26%, while operating margins of 20% and PAT margin at 15% augurs well for the railway PSU. “We expect revenue and PAT CAGR of 20% plus for next couple of years,” noted IndiaNivesh. According to IndiaNivesh, IRCTC IPO looks conservatively priced at a PE ratio of around 19x based on FY19 earnings, warranting a subscribe rating.
IRCTC generated a revenue of Rs 1,899 crore in FY19, up about 25% from the previous fiscal. The net profit soared 23.5% on-year to Rs 272.50 crore in the previous fiscal 2019. The firm which sells tickets for Indian Railways and handles its catering services saw 72 lakh logins per day, and 2.5 crore logins in a month. IRCTC has earned the reputation of being one of the most transacted websites in the Asia-Pacific region, with customers booking around 8 lakh tickets per day. Incorporated by the government in 1999, IRCTC was conferred the status of Miniratna (Category-I Public Sector Enterprise) status in 2008.
“Based on various parameters like strong earnings profile, diversified business segment, healthy return ratio, debt free status and most importantly monopoly business, we have a positive view on the issue,” brokerage firm Anand Rathi. At the upper price band of Rs 320, the stock is available at P/E multiple of 18.8x to its FY19 EPS of Rs 17, the brokerage firm said in IRCTC IPO note.