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IRCTC IPO Opens for Subscription Today: Brokerages Give a Big Thumbs-up

Screen grab of the IRCTC website.

Screen grab of the IRCTC website.

The Rs 645 crore IRCTC IPO comprises an offer for sale of 20 million shares, representing 12.5% of total paid-up equity by the Ministry of Railways.

IRCTC IPO Subscription: The initial public offering (IPO) of the state-owned Indian Railway Catering and Tourism Corporation Ltd (IRCTC) is set to open for subscription today at a price band of Rs 315-320. The Rs 645 crore IPO comprises an offer for sale of 20 million shares, representing 12.5% of total paid-up equity by the Ministry of Railways.

For those wishing to subscribe to the issue, the minimum bid lot is 40 equity shares and in multiples of 40 equity shares thereafter. Retail investors and employees will get the shares at a discount of Rs 10 apiece to the final offer price. But should you subscribe to the issue? Here’s what these five brokerage firms suggest:

IndiaNivesh says ‘subscribe’: IRCTC enjoys monopoly business in online rail ticket booking and food catering on running trains. Mobile application-based food ordering is gaining fast traction among travellers. It provides multiple caterers in tune with today’s taste and preferences of commuters.

We expect food catering and travel tourism segments to grow in mid-teens while operating margins of packaged water division to improve as more plants are commissioned. IPO looks conservatively priced at a PER of around 19x based on FY19 earnings. We recommend subscribe.

Anandrathi recommends subscribe to IRCTC IPO: IRCTC has unique business model and the company does not have any competition across any business segment. Based on various parameters like strong earnings profile, diversified business segment, healthy return ratio, debt-free status and most importantly monopoly business, we have a positive view on the issue. We have a positive outlook for the company and we recommend investors to ‘Subscribe’ to this issue.

Cholamandalam Securities says ‘Subscribe’: The company enjoys virtually monopolistic business which has huge potential to grow further. At upper priced band, the issue is valuing company at P/E of 18.8x and P/B of 4.9x based on FY19 financials. The issue appears fully priced in considering historical financials and multiples. There are no direct comparable companies available for relative analysis.

The unique business model with no direct competitors is likely to attract investor’s attention and keep shares in demand.

Investors can consider investment for short to medium term, being the first mover in the sector there will be buying interest post listing, too.

ICICI Direct says subscribe to IRCTC shares: 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 (earnings per share) growth. Coupled with healthy dividend payout (45% in FY19) and RoE (26.1%), we recommend ‘Subscribe’ to the issue at the offer price. Further, at the IPO price band of Rs 315-320, the stock is available at a price to earnings multiple of ~10x (FY21E EPS), which we believe looks attractive from the perspective of future earnings growth.

Angel Broking rated ‘subscribe’: IRCTC’s profitability will improve significantly due to tax reduction and increase in revenue from service charge for online ticketing. Hence, the brokerage advises investors to subscribe to the issue.