IRCTC Share Price: IRCTC steams ahead to another record high

Indian Railway Catering and Tourism Corporation’s (IRCTC) blistering run on the bourses continues with the stock soaring 485 per cent since its listing in October, bucking the dreary performance of its other listed public sector peers. With a monopoly in the company’s area of operations — catering, tourism and online ticketing for Indian Railways, investors and traders are making a beeline for the stock but analysts warn the run could stop abruptly because of stretched valuations.

IRCTC shares which were listed at Rs 644 on October 10 against the offer price of Rs 320, hit a new high of Rs 1,872 on Wednesday. Analysts say the uninterrupted run in IRCTC shares is because of investors’ appetite for themes that benefit from the internet expansion in the country. Almost 7.8 lakh tickets were sold daily on an average through IRCTC’s website during 2018-19.

The company has a strong balance sheet with net cash of Rs 1,150 crore as on September 2019 and 45 per cent dividend pay-out. IRCTC reported a 180 per cent increase in year-on-year profit at Rs 205.80 crore for the quarter ended December 31. Its revenue from operation increased 65 per cent to Rs 715.98 crore in the December quarter.

“Strong fundamentals and debt-free balance sheet along with decent return ratios; ROE being 26 per cent, operating margins of 20 per cent and PAT margin at 15 per cent augurs well,” said Dharmesh Kant, head of research, IndiaNivesh. “We expect food catering and travel tourism segments to grow in mid-teens while operating margins of packaged water division to improve as more plants are commissioned.”

Despite rosy prospects, the run-up in the stock has exceeded expectations.

“Though IRCTC as a monopolistic firm has an excellent business model, the valuation at 40 times its FY21earnings is not sustainable for a PSU stock,” said Kush Katakia, CEO, Beanstalk Advisory.

Low outstanding shares of the company could keep the momentum going at least for the moment. IRCTC has a free-flat of only 2.02 crore shares of which 1.14 crore shares are with institutions such as mutual funds and foreign portfolio investors. Retail shareholders own only 61.77 lakh shares. Daily average traded volumes in the stock in February was 67 lakh shares.