Despite near-term challenges, brokerage and research firm Prabhudas Lilladher believes IRCTC is best placed to bounce back once coronavirus fear reside.
IRCTC share price hits 5 per cent upper circuit to Rs 944.10 apiece on BSE in Monday’s trade even as India has been placed under 21-day lockdown in order to prevent the fast-spreading coronavirus. Last week, Indian Railway Catering and Tourism Corporation (IRCTC) shares were locked into lower circuit at Rs 815.60 due to the cancellation of passenger train services, a slump of nearly 60 per cent from its record high of Rs 1,995 touched in the second month of this year. In the wake of the rising coronavirus cases in India, which crossed the 1,000-mark on Sunday, all the passenger train services have been suspended till April 14, 2020.
Even with today’s rally in the stock, IRCTC shares were still trading nearly 53 per cent lower at Rs 944.10 from its record high of Rs 1,995. As IRCTC has a monopoly in online train ticket booking and packaged drinking water, suspension of train services will impact adversely. Even if there is a complete lockdown for one month, analysts say “revenue foregone for IRCTC can be in the region of Rs 262.50 crore”.
Despite near-term challenges, brokerage and research firm Prabhudas Lilladher believes IRCTC is best placed to bounce back once coronavirus fear resides. It has maintained ‘buy’ rating on IRCTC, with a target price of Rs 1,656 which is nearly a 43 per cent upside. IRCTC made its market debut last year on October 14 with a listing price of Rs 644 per share on BSE. The stock price is still 195 per cent up from its issue price of Rs 320 per share.
IRCTC has been conferred the Mini Ratna (Category-1 PSE) status by the governemnt of India. “IRCTC is debt free with cash balance of Rs11.6bn as of Dec 2019. Thus, it can tide over current crisis,” Prabhudas Lilladher said in its latest research note.
It further advised investors to make staggered buying and “do not rule out near-term weakness given the constantly evolving situation over lockdown.” Terming coronavirus as a Black Swan event, Prabhudas Lilladher said that the risk of reduction or abolishment in service charge has magnified and government can take a socialist approach to deal with the current situation.