The Indian Railway Catering and Tourism Corporation (IRCTC) launched an IPO- Initial Public Offering on September 30th, 2019. It is open for subscription and will be the largest offering from the Indian Railways so far. The initial public offer of the state-owned IRCTC was fully subscribed on October 1st, the second day of subscription. Retail investors saw the issue being subscribed to 2.07 times.
IRCTC IPO-PRICE BAND:
IRCTC is the 4th company from the Indian Railways Stable and the largest so far has launched its IPO. The company’s 638-crore rupees are the initial public offering. The price band is around Rs. 315-320 and the entire offer is an offer for sale where the promoter will be selling around 2-crore shares. The upper band of the price band is Rs. 328. The value of the market capitalization is close to Rs. 5,120-crores.
IRCTC is in the business of providing online ticketing, catering services, packaged drinking water and travel, and tourism services. Now in online ticketing services, it caters to nearly 73% of the tickets that are booked through the Indian Railways. And the per month average online ticket booking is more than 2.5-crore for the company. In catering services, it provides food services to the Indian Railways while in the water business it is into the manufacturing of packaged drinking water which is being sold under the brand- Rail Neer. Currently, it has 10 operational plants and also in the process of setting up 6 new plants and has proposed to add 4 new plants in the coming years.
Looking at the company’s revenue, it gets most of its revenue from the catering businesses 55% of its revenue comes from the catering service and the remaining comes from travel and tourism, internet ticketing and packaged drinking water. According to financial year FY17-19, IRCTC’s Revenue was 10.3%, Net Profit was 9.1% and EBITDA was 9.1%. The average EBIDTA margin for the company was close to 19.6%. It is a debt-free company with a cash balance of over Rs.1, 140-crores on its book. The book value per share is close to Rs. 65 while the cash value per share for the financial year 2019 is close to Rs. 71.
IRCTC’s return-on-equity has increased to 27.3%, Return-on-Capital Employed has increased to 31.9% and Return-on-Asset is 11.1% in FY19. The public issue will close on 3rd October 2019 and IRCTC will not receive any proceeds from the offer. All the proceeds will go in the selling shareholder. The stake sale will likely to bring down the government’s share in the state-run entity by around 12.5%. Finance Minister Nirmala Sitharaman had set a disinvestment target of Rs. 1.05-crore for FY20 and IRCTC-IPO is a part of it.
HOW TO APPLY FOR IRCTC IPO:
- IRCTC IPO is open for three days from September 30th to October 3rd, 2019. Retail investors will get a discount of Rs 10 on the issue price. Employees of IRCTC will also get a discount of Rs 10 on the issue price.
- The IPO can be applied in lot sizes of 40 shares and the minimum investment required to apply for the IPO is Rs 12,800.
- Retail investors can apply a maximum of 15 lots that require an investment of Rs. 1.92 lakh.
IRCTC IPO ALLOTMENT ANALYSIS:
- Of the total 20 million shares on offer in IRCTC IPO, 50% is allocated to qualified institutional buyers.
- 15% is available to the non-institutional investor category, and 35% to the retail category who will invest less than 2 lakh rupees.
- The employees have a reservation portion of 160,000 shares.
- In IRCTC IPO the lot size is 40 equity shares and all the investors have the liability to bid in multiples of 40 equity shares.
All the investors have an equal chance of being allotted IPO shares and no application is allotted more than one lot.
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