IRCTC share falls 5% as govt to sell stake at discount via OFS

Shares of Indian Railway Catering and Tourism Corporation (IRCTC), the ticketing and catering arm of Indian Railways, dropped over 5% in opening trade on Thursday as the government proposed to offload its stake in the company at a discount to the current prices. The promoter (Government of India) plans to sell 5% stake, or 4 crore equity shares, in the company through an offer for sale (OFS). The floor price for the OFS has been set at ₹680 per share, a discount of 7.4% from Wednesday’s closing price of ₹734.70 on the BSE, which may fetch ₹2,720 crore to the exchequer. The offer will open for subscription on December 15 and close on December 16.

Reacting to the news, IRCTC share price opened lower at ₹698 against the previous closing price of ₹734.7 on the BSE. In the opening deals, the largecap stock declined as much as 5.2% to hit a low of ₹696.7, while market capitalisation slipped to ₹56,084 crore.  In comparison, the BSE benchmark Sensex also witnessed weak trade, falling 162 points to 62,515 levels, tracking weak cues from Asian peers and a negative finish on Wall Street overnight after the U.S. central bank raised interest rate by 50 basis points.

IRCTC shares have delivered a stellar return to its shareholders since its listing in 2019, rising 350% during this period. In the last one year, the PSU stock has fallen 18%, while it has gained over 12% in the past six months. The stock has dropped 5% in a month and nearly 3% in a week. The largecap stock touched a 52-week high of ₹918.3 on January 17, 2022, and a 52-week low of ₹557 on June 6, 2022.

As per the exchange filing, IRCTC proposes to sell a 2.5% stake via the OFS route, with the option to sell an additional 2.5%, bringing the total issue size to 5% stake. “The President of India, acting through and represented by the Railways, Government of India is the Promoter of Indian Railway Catering and Tourism Corporation proposes to sell up to 2,00,00,000 equity shares of the company, (representing 2.5% of the total issued and paid up equity share capital of the company, with an option to additionally sell 2,00,00,000 equity shares (representing 2.5% of the total issued and paid up equity share capital of the Company),” the state-owned firm said in an exchange filing on Wednesday.

The issue will open and close for non-retail investors on December 15, while retail investors are allowed to place their bids on T+1 day, i.e., December 16. “Those non-retail investors who have placed their bids on T day and have chosen to carry forward their bids to T+1 day, shall be allowed to carry forward and also revise their bids on T+1 day as per the OFS guidelines. For retail investors and for non-retail investors who choose to carry forward their un-allotted bids to T+1 Day,” the filing said.

Axis Capital, Citigroup Global Markets, Goldman Sachs, and JM Financial have been appointed as brokers for the OFS.

For the July-September quarter of 2022 (Q2 FY23), IRCTC clocked 42.5% growth in its profit after tax (PAT) at ₹226 crore against ₹158.57 crore a year ago. However, on a quarter-on-quarter (QoQ) basis, it dropped 7.9% from ₹245.52 crore in the June quarter of the current fiscal. Revenue from operation almost doubled to ₹806 crore from ₹405 crore in the corresponding quarter last fiscal. On a sequential basis, it fell 5.4% from ₹853 crore in Q1 FY23. The total expenses of the company jumped 47.75% from ₹55.11 crore in Q2 FY22, to ₹81.42 crore during the quarter under review.

Segment-wise, revenue from catering services grew multi-fold to ₹334 crore as against ₹71 crore in the same period last fiscal when trains and catering services were resumed after being hit by the Covid-19 pandemic. The revenue from the internet ticketing business rose 13% to ₹300 crore from ₹265 crore in the year-ago period.