IRCTC operates in four business segments--internet ticketing, catering, packaged drinking water and travel and tourism.
The Rs 645-crore public offer of the Indian Railway Catering and Tourism Corporation (IRCTC) had been subscribed 81 percent a few hours after the IPO opened on September 30.
The initial public offering (IPO) received bids for 1.64 crore equity shares against the offer size of 2.016 crore shares, data available on the National Stock Exchange shows.
Shares set aside for retail investors subscribed 2.2 times and employees' portion was also fully subscribed, while non-institutional investors' category saw a subscription of 21 percent.
The public issue, which will remain opened till October 3, is a part of the government's divestment programme for the financial year 2019-20.
The IPO comprises an offer for sale of 2,01,60,000 shares, which will reduce the government’s stake to 87.40 percent.
As many as 1,60,000 shares are reserved for employees, who along with retail investors, will get shares at a discount of Rs 10 per share to final offer price.
All brokerages favoured subscribing the issue, given attractive valuations from the perspective of future earnings growth, unique business model, no competition across any business segment, diversified business segment, healthy return ratio, debt free status and most importantly monopoly business.
The issue has been offered in a price band of Rs 315-320 per share. "At the upper price band of Rs 320, the stock is available at P/E multiple of 18.8x to its FY19 EPS of Rs 17. We have a positive outlook for the company and we recommend investors to subscribe to this issue," Anand Rathi said.
ICICI Direct also said, "Inclusion of convenience fee on railway tickets, setting up of 10 water plants in next two years and recent tax reduction of corporate tax bodes well for EPS growth. Coupled with healthy dividend payout (45 percent in FY19) and RoE (26.1 percent), we recommend subscribe to the issue at the offer price."
IRCTC is the only entity authorised by the Indian Railways to provide catering services to the railways, online tickets and packaged drinking water at the stations and in trains.
The state-owned entity operates in four business segments, internet ticketing, catering, packaged drinking water, under the Rail Neer brand, and travel and tourism.
The internet ticketing segment contributed 12.35 percent to its FY19 revenue against 13.63 percent in the previous year. The catering business accounted for 55 percent of the revenue against 48.70 percent last year. Packaged drinking water counted for 9.28 percent revenue against previous year’s 11.13 percent, while travel and tourism 23.38 percent against 26.54 percent.
IDBI Capital Markets & Securities, SBI Capital Markets and YES Securities (India) are the lead managers to the offer.Note: The earlier version of the article mentioned the discount was 10 percent. The discount being offered in Rs 10. The error is regretted.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.