The offer is a part of government's divestment programme for current financial year 2019-20 and shares will be offered to employees and retail investors at a discount to final price.
The initial public offer (IPO) of state-owned Indian Railway Catering and Tourism Corporation (IRCTC) will open for subscription on Monday, September 30.
The offer is a part of the government's divestment programme for the current financial year 2019-20 and shares will be offered to employees and retail investors at a discount to the final price.
The issue will close on October 3.
The book running lead managers to the issue are IDBI Capital Markets & Securities, SBI Capital Markets and YES Securities (India).
Here are 10 key points you should know before applying for the public issue:
IRCTC is a central public sector enterprise (CPSEs) wholly-owned by the Government of India and under the administrative control of the Ministry of Railways.
It is the only entity authorised by Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains around the country.
The website of the company, irctc.co.in, is among the most frequented website with about 25 to 28 million transactions per month. It has also diversified into other businesses, including non-railway catering and services such as e-catering, executive lounges and budget hotels, which are in line with its objective to build a "one-stop solution" for customers.
Currently, IRCTC operates four business segments - internet ticketing, catering, packaged drinking water under the "Rail Neer" brand, and travel and tourism.
The issue comprises an offer for sale of 2,01,60,000 shares (representing 12.50 percent of total paid-up equity) of the face value Rs 10 each by the President of India.
Out of the total issue size, 1,60,000 equity shares are reserved for eligible employees. The company has offered a discount of Rs 10 per Equity Share on the Offer Price for the retail category and to eligible employees.
The minimum bid lot is 40 equity shares and in multiples of 40 equity shares thereafter.
IPO price band and size
The company aims to raise Rs 635.04 crore at Rs 315 per share, the lower end of price band and Rs 645.12 crore at Rs 320 per share, the higher end of the price band.
Objects of Issue
The objects of the offer are to carry out the disinvestment of 2,01,60,000 equity shares by the selling shareholder constituting 12.60 percent of company’s paid-up equity share capital and to achieve the benefits of listing the equity shares on the stock exchanges.
The company will not receive any proceeds from the offer and all proceeds shall go to the selling shareholder, the Government of India.Competitive Strengths
- IRCTC is the only entity authorized by Indian Railways to offer railway tickets online through the website irctc.co.in and mobile application, 'Rail Connect'.
- As a CPSE under the Ministry of Railways, it is the only entity authorised to manage the catering services on board trains and major static units at railway stations under the Catering Policy 2017.
- It is a comprehensive tourism and hospitality service provider in India.
- It is the only entity authorised by the Ministry of Railways to manufacture and distribute packaged drinking water at all railway stations and trains, subject to availability of Rail Neer.
- It has a robust operating system and internal controls that has enabled it to deliver quality products and services to customers across different segments of operation.
- It has a diversified board and senior management team with significant experience.
- Diversifying and offering new services to the passengers of Indian Railways and others.
- To strengthen and enhance the services provided by Indian Railways, and tap opportunities presented by digital payments in the Indian economy which are growing at a significant pace.
- To continue capturing new opportunities arising from the Catering Policy 2017, such as providing catering services on trains having pantry car service.
- To leverage the significant number of visitors on the website, it intends to continuously develop online offerings with enhanced product design capabilities and other value-added services in order to offer customers a personalised experience.
- Strengthen operational efficiencies.
Currently (pre-issue), promoter, the President of India holds 100 percent of the equity shares of company, out of which 15,99,99,944 equity shares are held by the President of India and an aggregate of 56 equity shares are held by VK Yadav, Purnendu Sekhar Mishra, Vijay Kumar, Vishwesh Chaube, Sushant Kumar Mishra, Sunil Mathur and Anurag as the nominees of the President of India.
After the public offer, the promoters will hold 87.40 percent of the post-offer paid-up equity share capital of the company.
The internet ticketing segment contributed 12.35 percent to its total FY19 revenue against 13.63 percent in the previous year and catering business 55 percent to total revenue against 48.70 percent.
Meanwhile, packaged drinking water under the 'Rail Neer' brand's contribution to revenue stood at 9.28 percent against 11.13 percent in the year-ago period and travel and tourism 23.38 percent against 26.54 percent.
Total revenue from its four segments at Rs 1,899.4 crore grew by 25 percent compared to FY18.
The company does not have any outstanding or sanctioned fund-based facilities. However, it has availed certain bank guarantee facilities from Kotak Mahindra Bank and IDBI Bank aggregating to Rs 8.66 crore, in order to be able to meet contractual obligations towards clients.
The company has Rs 1,140 crore cash in books as of FY19-end against Rs 834 crore in the previous year.
Mahendra Pratap Mall is the Chairman and Managing Director of the company since September 18, 2017. He is experienced in accounting and finance sector.
Rajni Hasija is the Whole-time Director (Tourism & Marketing) of the company since May 18, 2018. She was an officer of Indian Railway Traffic Service and has 30 years of experience in commercial and operation of railways.
Narendra is the Director (Finance) of the company since August 19, 2019. He is an officer of Indian Railway Accounts Service and presently holding Director (Finance) of the company in addition to his present position of executive director – finance (Public-Private Partnership), Railway Board. He is experienced in the field of accounts and finance.
Neeraj Sharma is the Part-time Government Director of the company since July 12, 2018. He is an Indian Railway Traffic Service Officer and has more than 25 years of experience in the railway sector.
Smita Rawat is the Part-time Government Director of the company since December 8, 2016. She is an Indian Railway Traffic Service Officer. She has more than 30 years of experience in the railway sector. She is presently posted as executive director (NFR&T), Railway Board.
Kanak Aggarwal, Sarita Deshpande, Rabi Narayan Bohidar, Dheeraj Sharma, Comal Ramachandran Sundaramurti and Sachin Chaturvedi are the Part-time (Non-official) Directors of the company.
Ajai Srivastava is the Group General Manager (Finance) and Chief Financial Officer of the company. He is experienced in the field of accounts and finance. He has been associated with the company since February 17, 2016.
Suman Kalra is the Company Secretary and Compliance Officer of the company. She has been associated with the company since November 23, 2013.
Risks and ConcernsHere are some risks and concerns highlighted by several brokerage houses:
- The company's business and revenues are substantially dependent on Indian Railways. Any adverse change in the policy of the Ministry of Railways may adversely affect profitability.
- The company does not have the ability to pass on any increase in raw ingredient costs due to price regulation by Indian Railways.
- The company uses PET bottles and other plastic items for its packaged drinking water and food, which is subject to various regulatory requirements and increasing public scrutiny.
- Indian food service industry and package water industry have both historically been fragmented and unorganised, lacking sufficient reliable industry data.
- If the Government were to permit open competition in any of the business segments, it may impact the financial results adversely for IRCTC.
- Failure to manage online security, the security of customers’ personal information and credit card fraud may expose the company to litigations and liabilities.