The document summarizes details of the IRCTC IPO, including: - IRCTC is issuing shares worth Rs.645 crore with a price band of Rs.315-320 per share. - Half of shares are reserved for QIBs, 35% for retail investors, and 15% for HNIs. - IRCTC's revenue and profits have grown at a CAGR of 10-9% in recent years, with net profit margins of 14% in FY2019. - Based on valuation analyses, the IPO appears underpriced by 77-116% compared to the company's estimated future cash flows and growth potential.

1. IRCTC IPO
VALUATION
- Neha Tolani
Amity University

2. IRCTC IPO Details
• IRCTC has launched its initial public offering (IPO) on
September 30, 2019 with a plan to raise up to Rs.645 crore.
The IPO has a price band of Rs.315-320 per equity share with
2.01 crore shares on sale.
• % Allocation of total number of shares reserved under 3 heads
:
• Qualified Institutional Investors (FIIs and DIIs) : 50%
• Retail Investors : 35%
• Non Institutional (High Net Worth) Investors : 15%

3. IRCTC Key Financials
• Total revenue of IRCTC grew at a CAGR of 10.4% since
last two financial years to Rs.1,956 crore. In the same
period, EBITDA grew at a CAGR of 9.1% to Rs.372
crore.
• The Net profit in the past two fiscals has grown at a
CAGR of 9% to Rs.272 crore. As of FY2019, the
company had an operating profit margin and net profit
margin of close to 20% and 14% respectively.
• The company has no debt. It is completely a debt-free
company. As of FY2019, IRCTC had cash and cash
equivalent of close to Rs 1,140 crore

4. IRCTC IPO – Valuation Angle
• The company is valued at Rs.5,120 crore at the upper
price band and the valuation is pegged at Rs.5,040 crore
at lower band.
• The company is commanding a price-to-earnings
multiple of 18.8 times at the higher end of the price band.
• This is quite attractive considering the factors that work
in favour of its business model and its strong return
ratios. There is a clear 50% appreciation in market
valuation of the company in coming years.
• So, it can be a great deal for a retail investor who can
avail a discount of Rs.10 per share for such a big growth
effect.

5. Fundamental Growth Rate
• The present value of Operating Cash flows = 7823.197 Crore.
• The Company has Cash & Cash Equivalents and Bank
Balance of 1140 Crore.
• The Company is debt free.
• Thus, the equity is valued at 8963.233 Crore.
• According to the fundamental growth rate scenario, the IPO
is underpriced by 77%.

6. Historical Growth Rate
• The present value of Operating Cash flows = 9441.403 Crore.
• The Company has Cash & Cash Equivalents and Bank
Balance of 1140 Crore.
• The Company is debt free.
• Thus, the equity is valued at 10,581.439 Crore.
• According to the historical growth rate scenario, the IPO
is underpriced by 109%.

7. 10 year projection – Company can maintain its
growth rate over long term
• Growth Rate is assumed to be 20% for the next 5 years and later it linearly drops
to fundamental growth rate of 12.8% over a period of 5 years. Later it is assumed
to operate till perpetuity having the growth rate of the economy (6.5%).
• The present value of Operating Cash flows = 9792.376 Crore.
• The Company has Cash & Cash Equivalents and Bank Balance of 1140 Crore.
• The Company is debt free.
• Thus, the equity is valued at 10,932.412 Crore.
• According to the 10 year projection scenario, the IPO is underpriced by 116%.

8. 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.

9. References
• https://framinc.wordpress.com/2019/10/15/irctc-ipo-
valuation/
• https://investorzone.in/ipo/irctc-ipo/
• https://blog.investyadnya.in/irctc-ipo-analysis-with-
valuation-angle/