IRCTC IPO description – IRCTC Limited (Indian Railway Catering And Tourism Corporation

Limited) was incorporated with the objective to upgrade, modernize and professionalize catering
and hospitality services, managing hospitality services at railway stations, on trains and other
locations and to promote international and domestic tourism in India through public-private
participation. The company was conferred the status of Mini –ratna (Category-I Public Sector
Enterprise) by the Government of India, on 1 May 2008.

Objects of the IRCTC IPO:

The objects of the Offer are: (i) to carry out the disinvestment of 20,160,000 Equity Shares by
the Selling shareholder constituting 12.60% of paid-up Equity Share capital IRCTC (ii) To
achieve the benefits of listing the Equity Shares on the Stock Exchanges. The company will not
receive any proceeds from the Offer and all proceeds shall go to the Selling Shareholder.

Listing Date: Oct 14 2019

Promoters And Management:

The govt. of India is the promoter of IRCTC.

IRCTC’s consolidated financial performance (in INR crore)

  FY2017 FY2018 FY2019

Revenue 1,602.9 1,569.6 1,956.7

Expenses 1,247.8 1,223.9 1,526.7

Net income 231.1 224.8 272.9

Net margin (%) 14.4 14.3 13.9

Financials of IRCTC IPO:

(fig. in cr)

Year Revenue EBITDA OPM PAT NPM Shares EPS

2017 1602 380 23.7% 229 11.4% 4.000 14.3

2018 1569 372 23.7% 220 10.9% 4.000 13.8

2019 1956 461 23.6% 272 13.5% 16.000 17.0

IRCTC IPO details

Subscription Dates 30 September – 3 October 2019

Price Band INR 315 – 320 per share (retail discount – INR10 per share)

Fresh issue Nil

Offer For Sale 20,160,000 shares (INR627.88 – 637.96 crore)

Total IPO size 20,160,000 shares (INR627.88 – 637.96 crore)

Minimum bid (lot size) 40 shares

Minimum investment INR12,200 – 12,400 (adjusting for retail discount)

Face Value  INR10 per share

Retail Allocation 35%

Listing On NSE, BSE

Subscription (no. of times,at 8 PM)

Category Shares offered
Day 1 Day 2 Day 3

QIB 10,000,000 0.00 1.65 108.79

NII 3,000,000 0.21 1.73 354.51

 Retail 7,000,000 2.22 6.21 14.90

Employees 160,000 1.14 2.64 5.84

Total 20,160,000 0.81 3.25 111.93

Listing Performance of IRCTC Limited 

IPO Opening Date: 30 September 2019

IPO Closing Date: 3 October 2019

Finalisation of Basis of Allotment: 9 October 2019

Initiation of refunds: 10 October 2019

Transfer of shares to demat accounts: 11 October 2019

Listing Date: 14 October 2019

Opening Price on NSE: INR626 per share (up 101.9% from IPO price for retail investors 310)

Closing Price on NSE: INR727.75 per share (up 134.8% from IPO price for retail investors)

Listing Performance of IRCTC Limited 

IPO Opening Date: 30 September 2019

IPO Closing Date: 3 October 2019

Finalisation of Basis of Allotment: 9 October 2019

Initiation of refunds: 10 October 2019

Transfer of shares to demat accounts: 11 October 2019

 Listing Date: 14 October 2019

Opening Price on NSE: INR626 per share (up 101.9% from IPO price for retail investors)

Closing Price on NSE: INR727.75 per share (up 134.8% from IPO price for retail investors)

View 1. The company is steadily growing in the last 3 years in term of Revenue and PAT. 2. The
company has very good EBITDA margins of above 20%. 3. The company has an asset-light
model and it is a debt-free company. 4.  The Mcap at higher band of Issue price is ~ 5100 Cr.
The Mcap/Sales multiple is 2.61x.( reasonable). 5.  The P/E multiple at higher band of issue is
~18x.( reasonable ). 6. The company has excellent RONW of 26% based on FY19 financials.

Comparison With Peers:

As on the date of this Red Herring Prospectus, there are no listed companies in India which are
engaged in the same line of business as our Company and comparable to our scale of operations,
hence comparison with industry peers are not applicable.

Recommendation on IRCTC IPO:

Review and Recommendation of InvestorZone is:  6/10 1.  The IRCTC has a monopoly business
as it is the only authorized dealer for catering, ticket booking, and water bottles supply in Indian
railways to the passengers. 2. They are one of the most transacted websites, www.irctc.co.in, in
the Asia-Pacific region with transaction volume averaging 2.5 to 2.8 cr transactions per month. 3.
The IRCTC is regularly giving very good dividends. Final Dividend during 2018-19:- INR 22.20
per share, F.Y 2017-18 INR 11.80 per share and F.Y 2016-17 INR 18.86 per share, including
Interim Dividend paid during the year F.Y 2018-19 INR 3.75 per share and F.Y 2016-17 INR
9.38 per share. 4. The Valuation at P/E multiple of 18x looks reasonable. 5. The reduction in
corporate tax to 25.17% will help the company as they are currently paying 34.99%. Moreover,
they have started charging a convenience fee from Sept 2019 to Rs. 15 for Non-AC and 30 for
AC which will help improve the bottom line in FY19.

Lead Manager of IRCTC IPO:

1. IDBI Capital Market Services Limited

2. SBI Capital Markets Limited
3. Yes Securities (India) Limited

Registrar of IRCTC IPO:

1. Alankit Assignments Limited IPO allotment process: Retail quota and lot size  
As one can see, IRCTC is offering 20,160,000 shares in the IPO in the price range of INR315-
320 per share. Out of these, 160,000 shares are reserved for employees and 20,000,000 shares are
offered to Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs) and Retail
Individual Investors (NIIs).

As mentioned above, retail investors have a 35% allocation in this IPO which works to 7,000,000
shares. It is important to note that this arrangement is not set in stone and for companies without
a profitable history, retail investors will be eligible for only 10% allocation.

Since IPO applications are made in multiples of lot size, one can either apply for minimum 40
shares or 80 shares, 120 shares and so on.

Note: The lot size is applicable only for IPO allotment and after listing, investors can sell their
shares in market in any quantity.

IPO allotment process: Cut-off price

The price band in this case is INR315 – 320 per share which means investors can make their
applications at any price point within this range. The downside of selecting a specific price is
that if there are more buyers above your price point, your application will be out of
consideration. Investors can also choose cut-off option which is a way of saying that the investor
is willing to pay any price within the price band.Following the IPO subscription dates, the ball
moves in the court of the registrar of the offer. The IPO registrar is in charge of finalizing the
allotment on the basis of guidelines prescribed by SEBI. In October 2012, the market regulator
made some changes in the IPO allotment process and the new guidelines treat all Retail
Individual Investor (RII) applications equally. Under the new system, applicants are allotted at
least the minimum application size, subject to availability of enough shares in the aggregate.
Following this guideline, two broad scenarios emerge and the system works in both cases.

In case of under subscription

If the aggregate demand of shares is less than the number of shares available in the retail
category, every investor will get full allotment, irrespective for their application size.

5000000 7000000

1 lot
In case of over subscription

In the event of aggregate demand exceeding the number of shares available, the registrar will try
to accommodate everyone by issuing one lot to as many applicants as possible.

For our example, 7 million IRCTC shares need to be divided in the lots of 40 shares (under the
current guidelines, no allotment is less than the minimum bid lot size). As a result, maximum
number of retail investors who can receive allotment = 7,000,000/40 = 175,000.

At this point, two situations may arise.

The IPO is oversubscribed (2 lakh) but not by a wide margin. Given that there are some
investors applying for multiple lots, the number of applications is less than the maximum
allottees. For our example, let’s assume there were 150,000 applicants, including 30,000 who
applied for two lots while the remaining 120,000 applied for one lot of 40 shares. In this case,  

Total demand = (120,000*40) + (30,000*80) = 7,200,000 shares

150000 *40=6000000

1000000/30000=33.33

What this means is that everyone will get one lot and there will still be 1 million shares left.
These shares will be proportionately allotted to the 30,000 investors who applied for two lots.

The IPO is oversubscribed by a wide margin. In this case, the number of applications is higher
than the maximum possible allottees. In our example, let’s assume the number of applications
received is 200,000. Since the registrar has to treat all applications equally, the 175,000
applicants will be randomly selected and this means 25,000 applicants will get no allotment.