By Shashank Nayar
Shares of state-owned mini ratna Indian Railway Catering and Tourism Corporation (IRCTC) made a stellar debut on Monday with listing gains of 128%. The stock ended the day at `728, which is more than double its issue price of `320. At closing, the newly-listed company's market capitalisation stood at `11,658 crore, which makes it more valuable than other leading listed financial companies. This is the best listing in two calendar years, even as five other companies have clocked listing gains over 100%, including Avenue Supermarts, which had jumped 114% on the listing day. IRCTC is a monopoly and provides catering services to Indian Railways, sells tickets online and packaged drinking water.
Analysts believe the company could generate robust returns over the next few quarters as revenue growth could be higher, following the reinstatement of convenience fee on online booking of train tickets. "In addition to a unique business model and a monopoly situation, the reinstatement of convenience fees on online ticket booking would give the company a strong revenue growth over the next 1-2 years," said Siddhartha Khemka, vice-president and head of retail research, Motilal Oswal.
According to data from the BSE, the stock closed about 7% away from its upper circuit limit of `772.8. The market capitalisation of the company stood at `11,590.4 crore.
Analysts also believe that the surge in the stock price is fundamentally due to a mismatch between demand and supply. "The stock has witnessed too much demand for an issue size, which is relatively small leading to the shares to surge," added Khemka. The government sold 12.5% of its stake in the company to raise nearly `645 crore. The IPO, which opened for subscription on September 30 and ended on October 3, comprised an offer for sale (OFS) of 2.01 crore equity shares. On the final day of its bidding, the issue was subscribed by 112 times. Qualified institutional buyers (QIBs) and non-institutional investors (NII) segment was subscribed by 108.79 times and 354.52 times, respectively, showed combined data on exchanges.
However, experts believe that most of the positive factors like IRCTC's monopoly situation and strong revenue growth projections have already been factored in and any trades further would be at a premium. "The stock currently is over-valued and is trading at a premium of 40x its FY19 EPS," said Arun Mantri, technical and derivative analyst, Karvy Stock Broking.