Service Charge Waiver on Rail Ticket Booking may Hit IRCTC Listing Plans
PROFIT & LOSS
Rajat Arora & Dheeraj Tiwari
New Delhi: The government’s decision to waive service charges on railway tickets sold online could affect its plans to list Indian Railway Catering and Tourism Corporation on stock markets because the company could land up in losses without ticket booking revenues.
“The listing potential of the company will come down since it will not be profitable anymore,” a top rail ministry official said. The matter will come up for discussion when the road map for listing of Indian Railway Catering and Tourism Corporation (IRCTC) is prepared, the official said.
In 2015-16, IRCTC posted reve- nue of ₹ 1,500 crore, of which around ₹ 550 crore came from ticket booking. The commission IRCTC makes from ticket booking cross-subsidises its loss-making ventures such as catering services. IRCTC reported a profit of ₹ 189 crore last financial year. The government waived service charges on train ticket booking on the IRCTC website in November 2016 to promote digital transaction.
Finance minister Arun Jaitley in his budget speech had said that railways will offer competitive ticket booking facility to the public at large. “Service charge on e-tickets booked through IRCTC has been withdrawn. Cashless reservations have gone up from 58% to 68%,” he had noted. Jaitley had also mentioned in his speech that the government will list shares of railway public sector enterprises such as IRCTC, Indian Railway Finance Corporation and Ircon International.
Market experts, however, warn that there won’t be many takers for IRCTC shares.
“Either railway has to pay IRCTC for its services or the company needs to find other sources to boost its revenue. Otherwise, there will be little interest from investors,” said a merchant banker who requested not to be named.
The railway ministry official quoted earlier said, “If waiving service charges is a permanent plan, we don’t think there is any point going ahead with the listing.” The person said the ministry had floated a draft note for forming a holding company for 14 of its companies. “Having a holding company would have ensured that proceeds from divestment accrue to the holding company, which the railways can use for development and capacity building,” he said.