India’s state-run firm delivers best trading debut in two years

Bloomberg

Indian Railway Catering & Tourism Corp (IRCTC) more than doubled on the first day of trading, the best debut for a mainboard listing since 2017, after its public float emerged as the most sought after for the nation’s state-run firms.
Lured by IRCTC’s monopoly status, investor demand exceeded shares on offer by 112 times, eclipsing the government-owned Housing & Urban Development Corp and Cochin Shipyard Ltd, whose maiden offerings were oversubscribed more than 75 times in 2017, a record year for Indian IPOs.
The company garnered 6.43 billion rupees ($91 million) for the government, which sold 20.1 million shares, or a 12.5% stake, in a price band of 315-320 rupees apiece. IRCTC’s IPO is also the biggest and the most successful among the four companies from the Indian Railways stable that have gone public.
The company’s core business is spread across four verticals — railway catering, tourism services, online ticketing and packaged drinking water. It is the only authorised firm by the Indian Railways to provide these services in trains.
Catering service is the largest contributor to IRCTC’s top line and the company controls about half the bottled water sold on stations.
Even so, it is internet ticketing that adds the most to its bottomline. About three-quarters of 1.4 million people who traveled by train daily in the April-to-August period booked tickets online.
“It is a unique IPO as most of IRCTC’s businesses are a monopoly,” said Abhimanyu Sofat, head of research at Mumbai-based IIFL Securities Ltd. “There are future levers of growth in terms of the fee charged on the ticket booking and packaged drinking water.”
The company has resumed charging a fee on tickets booked online, which is expected to add 4.5 billion rupees to revenue annually, said Arafat Saiyed, analyst at Mumbai-based brokerage Reliance Securities.