Indian Railway Catering and Tourism Corporation (IRCTC) is a subsidiary of the Indian Railways that handles the catering, tourism and online ticketing operations of the latter, with around 5,50,000 to 6,00,000 bookings every day. It is the world’s busiest and highest of 15 to 16 Lakhs tickets every day.[1]
IRCTC IPO
On 3 Oct 2019, IRCTC decided to go public via an IPO. IRCTC IPO received overwhelming response and IPO got a 111x subscription.
IRCTC IPO price was 320 and stock got bumper listing at 644 which was 100% higher than IPO price.
Since the day of listing IRCTC had a dream run from 320 to 1995 levels.
Why Stock surged from 6X in a matter of 4 months?
On 17 January 2020, IRCTC started operating the second semi-private train ”Tejas” between Mumbai and Ahmedabad. Link (Stock surged to 1500 levels)
On 16 February 2020, PM Modi inaugurated first semi-private Train ”Kashi Mahakaal” (3rd semi-private by IRCTC) between Varanasi and Indore connecting 4 Jyotirlingas of Lord Shiva. Link (Stock surged to 1995 levels).
IRCTC Fundamentals
When there is all good news across all counter, Investors often ignores the risk of buying the stock at higher prices.
At 1990 odd levels, IRCTC bagged a PE multiple of 117. And market capitalization of 31,000 crores.
Seriously, a company which neither owns railway infrastructure nor it owns train and trading at 117 PE multiples. Indian Railways has outsourced only a few trains to IRCTC but they still have full control over them.
Trigger for Correction in Stock Prices
Due to high valuations, the stock could not hold such valuations and needed a trigger for correction. IRCTC started correcting when news regarding coronavirus started spreading across the globe. In March 2020, WHO declared CoronaVirus as a pandemic and a serious threat to livelihood to mankind.
In India, as soon as CoronaVirus cases started increasing, Indian Railways decided to cancel dozens of trains in order to protect the virus from mass spreading.
As of now, 25 Mar 2020, Indian Railways has decided to cancel all passenger trains for 21 days. This is a serious blow on earnings for IRCTC. Due to which IRCTC is locked in continuous lower circuits. The stock has fallen from 1995 to 815 in a matter of a month, wiping out nearly 60% of market capitalization. The actual blow on earning (number) is still not confirmed as no one can tell when the CoronaVirus situation gets stabilizes.
Investor’s sentiments play a very important role in any investment. Once it gets reversed, it is not easy to restore them back. Therefore it is very important one should factor in all risks and rewards before investing in any stock.
