Indian Railway Catering and Tourism Corporation (IRCTC) will make its grand debut on October 14 after its initial public offering (IPO) received the highest ever subscription among PSUs.
The final issue price is fixed at Rs 320 per share, the higher end of the IPO price band. Retail investors and employees of the company received shares at a discount of Rs 10 per share. Hence the final IPO price for them is Rs 310 per share.
The Rs 638-crore public issue was subscribed 112 times from September to October 3, which meant it received Rs 72,000 crore worth of bids, backed by qualified institutional buyers (a category that was subscribed by 109 times), net institutional sales (NIIs) (354.5 times), retail (15 times) and employees (5.82 times).
After such an overwhelming response to the issue, a blockbuster or bumper listing is warranted on Monday (October 14), according to experts who spoke to Moneycontrol. They said the listing price is likely to be more than Rs 500, a premium of 56 percent over the issue price.
The grey market has also indicated a premium of more than 65 percent to IPO price, sources told Moneycontrol.
"Looking at the huge oversubscription – 112x, one can expect at least a 50 percent premium listing on Monday," Siddhartha Khemka, Senior Vice President, Head-Retail Research at Motilal Oswal Financial Services said.
Prashanth Tapse (AVP Research, Mehta Equities), Astha Jain (Senior Research Analyst at Hem Securities) and Rudra Shares & Stock Brokers also expect the listing price around Rs 500-525 per share, i.e. a premium of 56-64 percent over IPO price.
At this expected debut price, IRCTC asks for a market capitalisation of more than Rs 8,000 crore.
IRCTC is a Mini-Ratna Category-I Public Sector Enterprise and a wholly-owned subsidiary of Indian Railways, the only entity authorized by Indian Railways to provide catering services to railways, online railway tickets for trains in India. It also provides non-railway services including budget hotels, e-catering and executive lounges to create a one-stop solution for customers.
Its premium listing seems to be justified, and I that believe IRCTC gives the investor a unique opportunity to own a leading Mini–Ratna (Cat-I) with a dominant market share of 72 percent in Railway E-Ticketing bookings, Prashanth Tapse said.
"Considering its monopoly in the industry, high entry barrier business, diversified service offerings, favourable industry dynamics with strong levers in place to drive sustainable, profitable growth gives IRCTC a competitive advantage for long term play. Hence considering strong cash generating business, high ROCE and healthy dividend yield, we are positive with a target of Rs 650-670 in next 12 months," he said.
Rudra Shares and Stock Brokers also said as IRCTC enjoys monopoly, it has pricing power and future growth potential, and the brokerage maintains a positive outlook on the stock with the one year price target of Rs 675.
The public issue had comprised an offer for sale of 2,01,60,000 equity shares. The shareholding of government in the railways' tourism and catering subsidiary reduced to 87.40 percent post issue.
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 the previous year. The catering business accounted for 55 percent of the revenue against 48.70 percent in FY18. 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.
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