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IRCTC, Railway Ministry discussing new revenue share model where interest of minority shareholders will be protected: Sources

Given the sharp market reaction, senior officials of IRCTC do not expect the railway ministry to attempt a revenue-sharing agreement in the near future.

November 05, 2021 / 04:57 PM IST

Indian Railway Catering and Tourism Corporation (IRCTC) charges a convenience fee of Rs 15 for reservations in non-AC coaches and Rs 30 for those in AC ones when someone books the ticket online.

On October 28, the government announced it would take 50 percent of the total convenience fees collected. The next morning, the shares of IRCTC nosedived, falling as much as 30 percent, the steepest intraday decline since the company’s 2018 listing.

The shares recouped most of their losses and ended 7.5% lower after the government reversed its decision.

Given the sharp market reaction, senior officials of IRCTC do not expect the railway ministry to attempt a revenue-sharing agreement in the near future.

“The ministry will not look to try and re-impose such an agreement anytime soon, they have learnt from their mistakes,” a senior official from IRCTC told Moneycontrol.

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However, the official added that talks are still on with the ministry to come up with a model where the interests of minority shareholders are protected and IRCTC’s profit doesn’t take a hit.

Senior officials from the ministry confirmed this, saying they are in discussion with IRCTC, one of the biggest sources of revenue for the ministry, to develop a model where the interests of minority shareholders are protected.

“IRCTC sharing its revenues with the ministry will only help the further development of railway infrastructure in the country and will let us offer better services to the customers,” a senior government official said.

He added that it will take some time before a new revenue-sharing model will be rolled out and that the ministry is also looking to invite industry experts to suggest a workable plan.

On October 28, Indian Railways reintroduced its revenue-sharing agreement with IRCTC under which the latter was to share income from convenience fees for bookings made on its platform in a 50:50 ratio with the railway ministry, the company said in a regulatory filing.

The arrangement was to be enforced from November 1.

The re-imposition of the revenue-sharing model for convenience fees was in line with the agreement the ministry had with the IRCTC till 2016.

However, in 2016 the railway ministry had scrapped convenience fees on online payments in order to push customers to book tickets on IRCTC’s portal.

In 2014, IRCTC started sharing revenue from convenience fees with the government in an 80:20 ratio, which was changed to 50:50 in 2015 after the fee was doubled.

According to Dalal & Broacha Research, the revenue-sharing model would have meant a Rs 138.5-crore hit on the revenues of IRCTC in 2021-22, rising to Rs 495.7 crore in 2022-23.
Yaruqhullah Khan
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