FMCG volumes may revive in Q4 IRCTC files IPO draft papers, to offload 12.5%

Consumer goods sector might witness a volume growth revival by fourth quarter of this year provided the central government increases its spending and its pay-outs under PMKisan scheme reach farmers. However, the slowdown has hit FMCG players differently — some have been hit badly while some have bucked the trend.

"We believe demand will pick up from Q4FY20 once payouts under direct transfer schemes and better monsoon lead to more money in the hands of consumers. Increase in spending by the central government as well as its government payouts to farmers under the PMKisan scheme, better monsoon along with good distribution will support volume growth. Roll out of GST's invoice reconciliation mechanism will further spur demand for the organised sector," finds Edelweiss Securities.

The volume growth in FMCG sector has slowed down in the wake of the rural slowdown, liquidity tightening and a dip in consumer sentiment. Further, weak overall macroeconomic scenario including lower government spending, liquidity crisis hurting wholesalers, lower procurement despite MSP hikes, and limited payout of the PM-Kisan.

"Third quarter of FY19 was characterised by slowdown in automobile as well as consumer durable sectors. Sales growth of consumer staples, however, remained resilient largely on account of direct transfer schemes and government led initiatives. But, the cookie crumbled in Q4FY19 as the government massively slashed its expenditure. This triggered deceleration in the rural economy,” said Abneesh Roy, Executive Vice President, Institutional Equities, Edelweiss Securities. Indian Railway Catering and Tourism Corporation (IRCTC), the railways' tourism and catering arm, on Thursday filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India for its proposed initial public offering (IPO).

As per the DRHP Government will offload 12.50 per cent stake in IRCTC through the IPO.

According to market sources, the IPO, which will be an offer for sale, would raise around Rs 500 to Rs 600 crore. The issue comprises of 2 crore equity shares, of face value of Rs 10 each.

IRCTC operates one of the most transaction heavy railway ticket booking website, 'www.irctc.co.in' in the Asia-Pacific region with transaction volume averaging at 25 million per month and 7.2 million logins a day. Over 1.4 million passengers travel on a daily basis of which 71.42 per cent book their tickets online. Between FY14-19, online bookings have grown at a CAGR of 12.5 per cent.

At a premium of only 49 paise, IRCTC offers an optional travel insurance between Rs 0.75 million — Rs 1 million to its passengers. As of June 30, 2019, over 900 million passengers have opted for this travel insurance. IRCTC was conferred the status of "Miniratna" (Category-I Public Sector Enterprise) by the government on May 1, 2008. IRCTC has also diversified into other business segments like e-catering, executive lounges and budget hotels. The book running lead managers to the offer are IDBI Capital Markets & Securities, SBI Capital Markets and YES Securities. The IPO, which will be an offer for sale, would raise around `500 to `600 crore, said sources