IRCTC Zooms 6% to Hit Record High. Key Triggers Driving the Stock

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  • Sep 6, 2021 - IRCTC Zooms 6% to Hit Record High. Key Triggers Driving the Stock

IRCTC Zooms 6% to Hit Record High. Key Triggers Driving the Stock

Sep 6, 2021

IRCTC share price zoomed 6% today to cross the Rs 3,000 per share mark for the first time.

Shares of the company scaled all-time high of Rs 3,041 apiece on the BSE in the intra-day trade.

Its recent performance has even outperformed benchmark indices which are touching new highs almost every other day.

There's more. If we are to go by market experts, they are suggesting that the stock can rally even more from this level.

Shares of the travel support services company have defied gravity since listing on the bourses. It has almost turned into a 10-bagger by rising as much as 10 times from its IPO issue price of Rs 320 per share.

Since the start of this year, the stock is up over 100%. So what's supporting the stock of IRCTC?

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Vaccination drive

India is now administering 12.5 m Covid-19 vaccines daily which is higher than the population of several other countries.

As more and more people get vaccinated every day, chances are there would be less impact on the tourism and travel sector, even if there is a third wave.

Revenge travel

There's this new concept called 'revenge travel' and IRCTC will be the key beneficiary as people step out of their homes to explore local tourist destinations.

IRCTC has tied up with hotels, aviation and surface transport service providers while also focusing on strengthening its food supply business through tie-ups with local suppliers.

In its annual report, the company had said,

  • IRCTC continues to improve its position as a 'one-stop solution for varied travel and tourism needs.

    IRCTC has utilised the time to make direct tie-ups with Hotels & transportation companies across India for competitive rates.

As the unlock theme gets underway, investors are eyeing IRCTC as the company is a market leader and has a virtual monopoly.

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Monopoly

IRCTC enjoys monopoly in the sector. It's the only entity authorised by the Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India.

It has a dominant position in online rail bookings and packaged drinking water with around 73% and 45% market share, respectively.

It has government's backing.

Recent initiative

In the latest move, IRCTC ventured into the international and domestic cruise business, targeting the domestic market including potential outbound guests. It has signed an agreement with Cordelia Cruises for the same.

This move comes as a positive since IRCTC is looking to become a one-stop solution player for travel and tourism.

The company has also planned various initiatives for this year including monetisation of chatbot services & train information enquiry services, national rail museum booking website and mobile app, provisions for issuance of digital bills and cashless payments in trains, ticket booking through chatbots, EMI-based payment on the e-ticketing mobile app, among other initiatives.

Railways' asset monetization

Recently, it was announced that Rs 1.52 lakh crore Indian Railways' asset monetisation plan has been laid out in the National Monetisation Plan (NMP).

Already benefitting from the unlock activities, this announcement is like a cherry on top of a sundae for IRCTC.

Since there will be monetisation of passenger trains, IRCTC is expected to emerge as major beneficiary.

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Stock-split plan

On 12 August 2021, IRCTC's board approved a stock split in the ratio of 1:5.

This was done to enhance the liquidity in the capital market, widen the shareholder base and make the shares affordable to small investors.

Now that the shares will become more affordable, the number of investors would increase.

A stock split is done, primarily to make the stock more affordable for the small retail investors and increase liquidity.

All these factors combined together have set the course for IRCTC.

Equitymaster's view on IRCTC

We reached out to Tanushree Banerjee, Co-head of Research at Equitymaster, and editor of the premium recommendation service Forever Stocks, for her view on the company.

Here's what she has to say...

  • 'Despite being a PSU, IRCTC has a wide moat that few other travel and tourism companies can claim to have.

    E-tickets booked online through IRCTC's website and app accounted for 72.25% of the total reserved tickets over Indian Railways in financial year 2020. On an average, about 0.8 m tickets were booked daily through IRCTC's website and app during that year.

    Also, the growth of the catering business seems on a strong footing. During the year, IRCTC managed on-board catering services in 19 Rajdhanis, 2 Tejas, 1 Gatiman, 1 Vande Bharat, 22 Shatabdis, 19 Durontos, and 296 Mail Express trains.'

Stock performance

IRCTC share price opened the day on a flat note today on the BSE at Rs 2,874 against its previous close of Rs 2,869.

As the session progressed, the company's share zoomed 6% to touch a lifetime high of Rs 3,041.

After today's rally, the company now commands a marketcap of Rs 483.8 bn.

It stands at the 95th position in the overall marketcap ranking on the BSE.

The state-owned company surpassed Colgate, Cholamandalam Investment and Finance, Hindustan Aeronautics, Balkrishna Industries, ACC, and Bandhan Bank in the marketcap ranking today.

Over the past one year, IRCTC shares have gained 113%. On a year-to-date (YTD) basis, the stock has soared 100% so far.

As of June 2021, IRCTC's promoters - the Indian government holds 67.40% stake in the company.

About IRCTC

Indian Railway Catering and Tourism Corporation (IRCTC) was incorporated as a public limited company on 27 September 1999 and was granted a certificate of incorporation by the deputy registrar of companies NCT of Delhi and Haryana.

It's a central public sector enterprise (CPSE) wholly owned by the government of India and under the administrative control of the ministry of railways.

IRCTC is the only entity authorised by Indian Railways to provide catering services to railways online railway tickets and packaged drinking water at railway stations and trains in India.

The company was incorporated with the objective to upgrade modernise and professionalise catering and hospitality services managing hospitality services at railway stations on trains and other locations.

It also to promotes international and domestic tourism in India through public-private participation.

To know more about the company, check out IRCTC's company fact sheet and IRCTC's quarterly results.

You can also compare IRCTC with its peers on our website.

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To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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