IRCTC: a necessity, a monopoly

Stock Opportunities
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I guess the kind of impact is going to be +ve for IRCTC, the greater the cancellation & rebooking from the user end, the more the profit for IRCTC. For the end-user, they may feel frustrated but the story is the opposite for IRCTC

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As per today’s update to exchange, IRCTC to soon start bus bookings too. For this it has tied up over 50000 state transport and private buses in 22 states and 3 union territories. Worst seems to be over for this stock and hope to see good growth ahead.

Discl: Invested.

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For the benefit of those, who are closely tracking this monopoly business, attached Q3 earnings investor - management concall transcript shared by company yesterday. A lot of information is available w.r.t. their current earnings and future growth drivers etc.

Discl: Invested and probably will add more. However, this is not a buy recommendation.

IRCTC q3 earnings concall.pdf (886.6 KB)

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Today IRCTC was buzzing on the news that Railways to resume regular services from April 1. However, I could not find any official news on the exchanges at the time of writing this post.

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@sameernics,

hope it helps.

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Hopefully IRCTC would benefit from this

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Excellent detailed report on irctc. Must read for all investors of irctc.

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Dolat - IRCTC (Initiating Coverage)_24-Feb-21.pdf (2.7 MB)

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With up-gradation of Rail routes avg speed of Trains will be up which means journey will complete relatively earlier.
Price Conscious Indian May avoid eating if not necessary. So Catering story won’t be as rosy as mentioned in Report.
UDAN(Air Travel) is another hindrance for long distance travel indirectly impacts both ticketing and catering revenue
With DFC coming in and Railway planning for Zero Time Table for Freight Trains. This Booking business might also come to IRCTC in Future.

Just sharing my thoughts.

Not Invested but tracking

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Thanks, the revised meal fare alone will give it some fantastic results(meal fare revision done in 2019 end), once all routes are opened. The average hike is about 60% across all meal types,from the report

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One of the reasons why PSU scrips go all up or all down; this kind of news is likely to affect the price downwards. If there is no clarity for contractors, how can anyone trust IRCTC to honour any contract? And they will get away with this as they’re GOI owned and can do all this stuff as no contractor has the means to fight and not get blacklisted.

Have invested and find this knee jerk actions weird and unexplainable to the general populace

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This is a positive news for IRCTC
This gives a scope for better pricing and also better quality food
This also gives scope for own kitchen products resulting higher revenue

All in all this is a new start for better yield and market has given thumps up.

Hope this will reflect in quarterly results.

One can give their views if they differ from above.

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Actually this is for catering contracts which were awarded before pandemic for selling cooked food. In June-20, Railway decided to run special trains and not to run regular trains. Hence, all those previous contacts were put on hold as Railways was not running regular trains. Since its been a long time that railways is not running regular trains hence they directed IRCTC to refund advance licensee fees on pro-rata and refund security deposits.

Presently special trains are running across India and cooked food is not allowed in the train, only ready to eat meals is allowed and for that separate contacts are issued.

IRCTC catering segment is majorly impacted due to fewer no. of trains running and lower license fees as cooked food is not allowed in trains as per new policy of railways. This led to a big revenue drop on YOY basis in catering segment in last quarterly results (DEC-20).

However, these factors doesn’t seems to be stopping stock price. Hehehe

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The stock price is discounting next year and the growth ahead of us.
Imagine:

  1. All trains restored - IRCTC runs a few (~10-15) trains themselves

  2. Catering fully functional from September

  3. Bus ticketing takes off

I think the stock will see 2500-2800 ish levels in such a scenario, meaning the upside is not that great, but still investible.

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Stock still 3-4 per cent down from ATH (pre-covid). OFS overhang from December completely over. with 35-40 per cent trains they are at 8 lakh train tickets per day (at rs. 18 realization). During last one year, capacity from new rail neer plants added, catering will be with the new rates. Assuming “revenge travel” kicks in, we can see decent upside with more importantly some margin of safety.

LKO - NDLS Tejas is operatinal from 14.02.2021 (4 days a week - Friday to Monday). Break even for Tejas is at 66-72%. And unlike IR, they need not run TEJAS at losses.

In any case major profits are from ticketing and with the change from offline to online booking (75 % pre- covid to 90% post covid) and additional bookings in the form of more reserved coaches post covid has helped ticketing return to near normal.

IMHO, bus segment will take time. But it reflects the management’s intention to think like a private sector player. they also stated in an interview they will be setting up tickets from cruise also (zee biz I think). not sure how vast that market is. The ticketing market for bus segment is definitely there. Let us see how it pans out :slight_smile:

Disclosure: invested at lower levels.

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As disclosed by IRCTC today, it will operate new package trips (through Golden Chariot Train) from 14th March.

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