On Wednesday (September 25), the government-owned Indian Railway Catering and Tourism Corp. Ltd (IRCTC) has announced that it will be launching its initial public offer (IPO). According to reports, IRCTC is looking to raise up to INR 645 Cr as it opens bids on September 30.
The IPO, whose price band has been fixed at INR 315-320 per share, will close on October 3. The issue comprises an offer for sale of 2,01,60,000 shares and is a part of the government’s divestment process.
Here Are The Details Of The Offer
The floor price and cap price are 31.5 times and 32 times the face value of the equity shares respectively. There will also be additional employee reservation portion of 1.6 lakh shares, taking the total offer size to 12.6% of total paid-up equity.
Of the total shares on offer, 50% will be available for allocation to qualified institutional buyers (QIBs), including 2 lakh equity shares for the mutual fund portion on a proportionate basis. In addition, not less than 15% of the offer will be available to non-institutional investor category and at least 35% will be made available to the retail category.
The book running lead managers to the offer are IDBI Capital Markets & Securities, SBI Capital Markets and YES Securities (India). Following the IPO, the government’s stake in IRCTC will come down by 12.5%.
IRCTC: Over 1.4 Mn Daily Passengers
IRCTC manages ticket selling and catering services for Indian railways. The company was incorporated on September 27, 1999, as a public limited company.
The company says that it is the only entity authorised by the Indian railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India. It has also diversified into other business segments like e-catering, executive lounges and budget hotels.
The company claims to have a transaction volume of more than 25 Mn per month and 7.2 Mn logins per day and about 800K tickets booked every day through IRCTC website and Rail Connect.
Over 1.4 Mn passengers travel on a daily basis of which 71.42% book their tickets online. Between FY14-19, online bookings have grown at an annual rate of 12.5%.
The Challenges Of IRCTC IPO
The IPO of IRCTC has been on the cards since long but was postponed due to the waiver of service charge on e-ticketing by the government, after demonetisation, that wiped out INR 500 Cr in annual revenue for IRCTC. However, the finance ministry had partially reimbursed this.
Later, the finances improved through utilising the website for advertising, data monetisation, e-auctioning and retail management. It also saw an increase in revenue from its catering business and the sale of Rail Neer (the bottled water brand of IRCTC) in the last two years. In the fiscal year 2019, its sales rose 25% to INR 1,899 Cr and the profit grew 23.5% to INR 272.5 Cr.
However, recently, the government allowed IRCTC to bring back the service charge on online ticket booking and the same was levied from September 1. The service taxes were removed in 2016 to boost digital transaction, after the demonetisation of old INR 500 and INR 1K currency.
The BJP-led government has so far offloaded various government-owned companies to reach INR 1.05 Tn for this financial year. It has managed to generate close to INR 12 K Cr through strategic disinvestment drive.