IRCTC IPO Opens. Should You Invest?

Indian Railway Catering and Tourism Corporation (IRCTC), the catering and online ticketing arm of the Indian Railways, is selling shares in a three-day initial public offering (IPO) which opened today for subscription and will end on October 3. The IRCTC IPO is an offer for sale wherein its promoter, Government of India, is selling its 12.6 per cent stake in the company to achieve benefits of listing the equity shares on the stock exchanges. The proceeds from the IPO will go to the promoter of the company. IRCTC is the only entity authorized by Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India. (Also Read: All You Need To Know About IRCTC Initial Public Offer)

IRCTC IPO: Here are details of price band, issue size and brokerage calls for Initial Public Offering

IRCTC IPO Price Band:

IRCTC is selling equity shares of face value of Rs 10 each in the price band of Rs 315-320 in lot sizes of 40 shares per lot and in multiples thereof. At the upper price band the company will raise Rs 645 crore, according to a note shared by Anand Rathi. IRCTC's employees and retail investors are being offered a discount of Rs 10 per share.

IRCTC Issue Size:

IRCTC is selling 2.01 crore shares and at the upper price band the company is valued at Rs 5,120 crore and at lower band the valuation is pegged at Rs 5,040 crore, according to a note shared by Axis Capital. 50 per cent of the total shares on the offer are reserved for qualified institutional buyers (QIBs), 35 per cent are reserved for retail investors and 15 per cent is reserved for the non-institutional buyers.

Should you invest in IRCTC IPO?

"IRCTC has unique business model and the company does not have any competition across any business segment. Based on various parameters like strong earnings profile, diversified business segment, healthy return ratio, debt free status and most importantly monopoly business, we have a positive view on the issue," brokerage firm Anand Rathi said in an IPO note.

"The issue has been offered at a price band of Rs 315-320 per equity share. At the upper price band of Rs 320, the stock is available at price to earnings multiple of 18.8 times to its FY19 earnings per share of Rs 17. We have a positive outlook for the company and we recommend investors to "Subscribe" to this issue," Anand Rathi's note adds.

"Recent tax reduction by government to 25.2 per cent and increase in revenue from service charge for online ticketing will improve profitability substantially going forward. There is also significant opportunity for the company to ramp up the catering business given a very large captive audience which is currently being underserved," Angel Broking said.

"Increasing business volumes from catering and packaged drinking water businesses, along with service charge for online ticket booking will drive earnings growth for the company between FY19-21. We would therefore recommend to "Subscribe" to the issue," Angel Broking adds.