Railway Board fiasco hits IRCTC market valuation

The Railway Board fiasco hit the IRCTC share in the stock market on Friday.

The IRCTC on Thursday had announced that the company would have to share the convenience fee in the ratio of 50:50 with the Railways from November 1.

When stock tanked in the early morning trade by 30%, in a dramatic 19-hour-turnaround, the Department of Investment and Public Asset Management Secretary announced that the Indian Railways was withdrawing its decision on a convenience fee-sharing agreement for IRCTC.

“The Railway Board has decided to reverse its decision given the market sentiment and also the fact that the IRCTC revenues have suffered a lot during the lockdown,” an official in the railways said.

Also Read | IRCTC asked to restart sharing 50% convenience fee with Railway Ministry

Though shares of IRCTC recovered most of their early losses after the announcement of reversing the decision, it closed 7.45 per cent lower at Rs 845.65 on the BSE and 7.74 per cent down at Rs 842.8 on the NSE.

The fall in share price had wiped off as much as Rs 21,900 crore from its market valuation in early trade. Despite the government decision to withdraw its earlier order, at market closing, the market capitalisation of the company was Rs 67,652 crore, down from Rs 73,100 crore on Thursday's close.

IRCTC is the sole entity authorised by the Indian Railways to facilitate the booking of tickets, manage catering services and packaged drinking water in trains and railways stations.

Also Read | Indian Railways withdraws IRCTC convenience fee order

Earning from convenience fee on train tickets is the largest revenue for the company.

The convenience fee is not part of the rail fare, instead, it is for the service offered by IRCTC of booking a ticket on the web.

The company earned Rs 299.13 crore from the convenience fee in 2020-21 and Rs 350 crore in 2019-2020. When the government sought 50% shares, investors started selling the stocks in the market.

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In 2014-15, when the revenue sharing was 20-80, the catering arm received the majority of the Rs 253 crore revenue. The following year, the revenue generated from this was Rs 552 crore with a 50-50 share arrangement.

In 2016-17, with a similar revenue-sharing model, the fee generated Rs 362 crore as earning for the IRCTC-Railway combine.

However, the convenience fee was discontinued thereafter and the duo did not earn any revenue from it till 2019.

The IRCTC began charging the fee again during the coronavirus crisis mainly to boost its revenues during the slowdown. The Railways, however, gave up its share.

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