The Initial Public Offering (IPO) of the Indian Railway Catering and Tourism Corporation (IRCTC) – the largest in the ecommerce space – received an arousing response for Indian markets, as the bull in the markets are placing huge bets on the stock.
By the end of the first day, the stock had seen subscription of 65.6% subscription. According to data available with NSE, the company had received 1.32 crore bids for 2.016 crore shares it had put on sale.
Most analysts and brokerages are suggesting the buy rating on the company’s IPO.
"IRCTC is a well-run enterprise and have done a great job digitising the railway network. Furthermore it continues to be a significant growth driver with new areas like Train Operation. Longer term outlook will depend on the government's divestment plan for IRCTC and how it gets included in different indices," said Anubhav Srivastava, Partner, Infinity Alternatives.
The company is a Central Public Sector Enterprise and the only entity authorised by Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India.
Analysts also believe that the company has been fairly valued by the government. “The valuation of the stock is quite reasonable – given that it’s an asset light model and the return on equity is high. They have put good money on the table for the investors. The have also started charging the convience fee from September 1. That is not captured in present number, but it will help their earnings next year”, said Umesh Mehta - Head of Research, Samco Securities.
The stock has been offer in the price band of Rs 315 to Rs 320 – 18.5 and 18.8 times the company’s earnings per share of Rs 17.04. The company plans to raise Rs 645 crore from the IPO -- the biggest in Indian ecommerce space. The first ecommerce company to hit the markets was Infibeam in March 2016, which amounted to Rs 450 crore. Other prominent ecommerce IPOs in India include IndiaMART (Rs 476 crore) and Affle India (Rs 459 crore).
Analysts believe that it will give a much needed push to the Indian primary capital market that had dried up due to the bear run in the past months. However, analysts believe that it won’t encourage the Indian e-commerce companies for IPOs as they are still reeling under losses, unlike IRCTC.
In FY2019, the company had paid a dividend of 44.89% or Rs 7.65 per share to its sole shareholder – the Centre.
For the financial year ended March 2019, the company had seen its revenue jump by 24.7% to Rs 1,956.66 crore, while the bottomline witnessed a jump of 23.6% to Rs 272.9 crore.