InvestorQ : How has been the final response to the IRCTC IPO and what to do on listing?
Rutuja Nigam made post

How has been the final response to the IRCTC IPO and what to do on listing?

Arti Chavan answered.
3 years ago

In a nutshell, the response has been absolutely fantastic. The final numbers of oversubscription as of evening of 03rd October are as under:

QIB portion – oversubscribed 108.8 times

HNI portion – oversubscribed 354.5 times

Retail portion – oversubscribed 14.67 times

Employee portion – Oversubscribed 5.79 times

Overall subscription – 111.8 times

You may recollect that the Indian Railway Catering and Tourism Corp’s (IRCTC) initial public offering (IPO) was intended to raise Rs. 645 crore rupees and has now been subscribed nearly 111.8 times and there could still be some more increase but the bottom line is that the response is fantastic. In all, investors bid for 225 crore shares of the company, compared with 2.02 crore shares on offer, which explains the 111.8 times oversubscription. You may be aware that this was an offer for sale where the government is taking partial exit and hence there is no fresh funds coming into the company as a result of this IPO.

IRCTC is likely to see improved valuation as well as a spurt in EPS from the second half of FY20 due to restoration of service charges which were stopped after demonetization. Also the recent tax cuts announced should benefit the company. It is a monopoly supplier to the Indian Railways and that gives it an assured market and steady revenue flows. IRCTC basically is owned by the government but comes under the administrative umbrella of the Indian Railways. The company is authorized by the Railway Ministry to offer Indian railway tickets online, catering service and exclusively manufacture and supply packaged drinking water at railway stations and on trains across India.

There are positives and risks in the model. The positive is that this is a stock that has virtual monopoly and steady revenues. However, it is also a stock that is too dependent on just one organization. Railways has already indicated that it may look at more private participation in such ventures and that could be a risk for IRCTC in the long run.

If you are a retail investor, you would have got a 10% discount so that is your advantage. However, this has seen tremendous 354 times oversubscription in HNI segment which would largely be funding customers. They would be looking at an immediate exit on listing and hence volatility is bound to be there. If you get a good price on listing, look to exit the stock.