IRCTC, a subsidiary of Indian Railways, handles catering, tourism, and online ticketing operations. It conducted an IPO in September 2019 that was oversubscribed 112 times. When shares began trading, the price rose significantly above the issue price of Rs. 320 per share. While the IPO raised Rs. 645 crore for the government, Indian Railways protested that the shares were underpriced given IRCTC's monopoly in key business segments and future growth potential. Investors are advised to subscribe to the IPO and hold shares for the long term.

1. IRCTC IPO
By
Akshita Garg
Amity University

2. IRCTC
• Indian Railway Catering and Tourism Corporation (IRCTC) is a subsidiary of
the Indian Railways that handles the catering, tourism and online ticketing
operations of the latter, with around 5,50,000 to 6,00,000 bookings everyday. It is the
world's second busiest and highest of 15 to 16 Lakhs tickets every day.
• IRCTC started running private trains, and "Tejas Express" become India's first
private train on 4th Oct 2019. Uttar Pradesh Chief Minister Yogi Adityanath flagged
off the first Tejas Express, the country's first "private" train run by its subsidiary
IRCTC, on the Lucknow-New Delhi route.

3. WHAT IS INITIAL PUBLIC OFFERING (IPO)?
• It is the process by which a company can go public by sale of its stocks to the general public.
• It is when the company decides to be listed on an exchange and hence goes public.
• It provides the company with access to raising a lot of money.
• This gives the company a greater ability to grow and expand.
• The company which offers its shares, known as an ‘issuer’, does so with the help of
merchant bankers. (Underwriters).
• After IPO, the company’s shares are traded in an open market.
• Those shares can be further sold by investors through secondary market trading.

4. • IRCTC held an initial public offering on the National Stock Exchange on 30 September
2019, the IPO got oversubscription of 112 times.[3] The base price of shares was set
between ₹315 and ₹320 (US$4.60) per share for the IPO. When the listing went live on 14
October 2019, the share price opened at a ₹625 and ₹646 on NSE and BSE respectively and
rose massively from there. The IPO has reduced Indian Railway's shareholding in the
company to 87.40%.
• IRCTC is offering 20,160,000 shares which represent 12.6% of the company at 320 Rs. per
share, raising 645 Crore in the process – Valuing the company at 5072 Crore at IPO.
• The company primarily operates in 4 segments –
1. Catering
2. Online Ticketing
3. Packaged Drinking Water ( Manufacturing and Distribution )
4. Tourism

5. RISK FACTORS :
1. Any change in policy of the Ministry of Railways.
2. Company is involved in legal proceedings.
3. Introduction of competition by the government in the business areas of bookings,
catering and packaged drinking water.
4. Maintenance of quality standards and brand image.
5. Managing and running operations efficiently.
6. Use of plastic bottles for packaged drinking water.
7. Strikes or work stoppages by employees or people.

6. COMPETITIVE ADVANTAGE :
• IRCTC is the only authorized entity which provides ticket booking
services to the Indian Railways, Provides catering services on trains
and railway stations and Manufactures & Distributes packaged
drinking water on trains and at railway station (subject to
availability). Thus, it is a monopoly in these 3 business segments.

7. RAILWAYS PROTEST OVER UNDER-PRICING OF
IRCTC IPO
Indian Railways is miffed over the pricing of IRCTCNSE 0.61 % IPO that saw an overwhelming
response and was listed at 101 per cent premium.
The national transporter lodged a protest about the price at which shares were offered to investors
and has sought better due diligence for future transactions, given the long pipeline of public offers of
state-run companies, reported TOI.
IRCTC shares, which were issued at Rs 320, listed at Rs 644 on the BSE and closed at Rs 729 on
Monday, valuing the company at nearly Rs 11,700 crore. In terms of over-subscription, the railway
PSU's offer was the most successful issue by a state-run company.

8. The government, on the other hand, raised Rs 645 crore for a 12.6 per cent stake
that it sold, which valued the company at over Rs 5,000 crore, raising questions
over the valuation undertaken by the merchant bankers. IDBI Capital Markets,
SBI Capital Markets and Yes Securities managed the issue.
On Thursday, the stock was trading at Rs 708, up 1 per cent from the previous
close.
The first proposal to list the PSU — which is largely into ticketing and also entered
the business of running trains recently — came around two years ago, but railway
minister Piyush Goyal opposed the plan as the company was valued at just around
Rs 2,500 crore.
The proposal came months after the demonetisation exercise when IRCTC had
stopped collecting a fee on ticket bookings, pulling down its overall revenue.

9. CONCLUSION
• The IPO seems to be underpriced and investors should
subscribe to the IPO. The investors should hold the
company for the long term ( economic moat ) and closely
follow the earnings and risk factors related to the company.

10. REFERENCES
• https://economictimes.indiatimes.com/markets/stocks/news/railways-protest-over-
under-pricing-of-irctc-ipo/articleshow/71626752.cms
• https://en.wikipedia.org/wiki/Indian_Railway_Catering_and_Tourism_Corporation
• https://framinc.wordpress.com/2019/10/15/irctc-ipo-valuation/