IRCTC stock to take a hit on 50:50 revenue sharing move with Centre

Some analysts pegs the convenience fee for IRCTC at Rs 740-Rs 780 crore for FY23 and FY24, respectively.

Published: 29th October 2021 03:43 AM  |   Last Updated: 29th October 2021 09:20 AM   |  A+A-

Railways, train, Compartment

For representational images (Photo| EPS)

By Express News Service

NEW DELHI:  Indian Railways Catering and Tourism Corporation’s (IRCTC), which provides ticketing and catering to the Indian Railways, has been asked by the government to share revenues generated from convenience fees for bookings made on its website on a 50:50 basis from November 1, 2021.

The decision is expected to have adverse impact on the company’s stock.

“ln compliance with the Regulation 30 of SEBI Regulations, 2015, it is to be informed that Ministry of Railways vide above-referred letter has conveyed its decision to share the revenue earned from convenience fee collected by IRCTC in the ratio of 50: 50 w.e.f 1st November 2021,” IRCTC said in a regulatory filing.

Some analysts pegs the convenience fee for IRCTC at Rs 740-Rs 780 crore for FY23 and FY24, respectively.

“Sharing 50% of revenue with Railways would mean that the EBIT margin of ticketing division would fall from 85% to 48% in FY23/FY24,” says an analyst.

Correspondingly, the EPS estimate cut would be in the region of 28-27% to Rs 44-Rs 49 for FY23/FY24, respectively.

Shriram Subramanian, MD of proxy advisory firm Ingovern, said this is an ideal case for a class action suit against the President of India, the majority shareholder.

Amit Tandon, MD of proxy advisory firm IiAS, said the suddenness of the decision will have shareholders feeling shortchanged. Gaurav Garg, Head of Research, CapitalVia Global Research, said that the news is negative for the shareholders of the company as a major chunk of revenue would go out of company’s books and will impact the valuation. 

This announcement came on the day when share price of IRCTC gained 11% to Rs 923 as the stock traded ex-split.


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