IRCTC’S shares accelerate as travel bug bites

Stock has gained about 30 per cent since the beginning of February

Shares of Indian Railway Catering and Tourism Corporation (IRCTC) have risen almost 30 per cent since the beginning of February as investors are betting on the easing of Covid-19-related restrictions and vaccination drive boosting travel and tourism. The stock hit a 52-week high of ~1,989 on Tuesday, and traded at ~1,884.35 on the BSE on Wednesday.

The government-owned company had seen business grind to a halt as train operations were severely impacted in the first half of the current fiscal because of the Covid outbreak and subsequent nationwide lockdown. However, the worst of the disruption is believed to behind and the earnings outlook has improved steadily.

At present, IRCTC is booking approximately 800,000 tickets per day, compared with 900,000-950,000 tickets per day before the pandemic. In fact, the pandemic has acted as a boon for the company’s ticketing business as adoption of online ticketing has grown drastically to about 90 per cent, from around 73 per cent in FY20.

“This adoption itself would drive revenue growth of about 25 per cent from its peak revenue run rate in Q3FY20,” said Rahul Jain, research analyst at Dolat Capital. At another event, the government initiated the process of converting several unreserved coaches into reserved class across trains and, as a result, has increased the potential ticketing market by about 30-40 per cent based on current capacity, added Jain.

With more trains slated to become operational (currently 400 trains are plying, representing 35-40 per cent of total capacity) and cooked food being allowed to be sold, IRCTC’S bread-and-butter business of catering, which accounts for 46 per cent of its overall sales, is also benefiting. Additionally, the upward revision in pricing in the catering segment is also seen boosting average realisation, say analysts.

The company’s revenue had plunged 74 per cent to ~444 crore while net profit plummeted 77 per cent to ~86 crore in the nine-months ended December 31, compared with the year-ago period. However, as business outlook improves, performance is also expected to follow suit. Analysts at Dolat Capital estimate IRCTC to report revenue of ~2,095 crore and net profit of ~657 crore in FY22, which compares well with its FY20 revenue of ~2,276 crore and net profit of ~527 crore.

IRCTC enjoys a monopoly as it is the only entity authorised by Indian Railways to provide online booking of railway tickets and manage the catering services onboard trains and major static units at railway stations.

The company’s entry into passenger rail operations, huge potential in e-catering business, and superior balance sheet quality provide ample confidence about its long-term growth prospects. Investors with a long-term horizon, thus, can accumulate on dips.