IRCTC equals D-Mart’s listing feat, analysts say it’s time to book partial profit
Many analysts were anticipating the stock to list at around Rs 600.
But will the similarity end there, or will it script a sustained post-listing rise like D-Mart did?
Analysts warned that is unlikely to be the case. Instead of trying to find further similarities with past IPOs, investors should look to take off partial profits in the first three days, they said.
IRCTC has a unique business and looks attractive from a long-term perspective. Potential investors, who failed to get shares through IPO subscription, can wait for some time to buy on dips, analysts said.
The bumper listing of IRCTC took Dalal Street by surprise, as many analysts were anticipating the stock to list at around Rs 600. The stock debuted at Rs 644. Grey market trades in the stock were suggesting at least 70 per cent listing premium.
The scrip ended with at Rs 728.60, a premium of 127.69 per cent over its listing price of Rs 320.
At the prevailing level of Rs 698, the scrip is factoring in most of the near-term positives, analysts said. “People are drawing an analogy between IRCTC and D-Mart, which kept on rising post listing. The railways space is quite interesting, but one must not forget that it is a PSU stock, and thus has associated risks,” said Deepak Jasani of HDFC Securities.
“If not today afternoon, one can think of taking profits off the table partially in the first three days, as this would be the time when whoever wishes to buy the stock will buy. One can anyway buy the stock later after a quarter or two,” he said.
The stock has moved up too much too fast, said Sunil Jain, Head of Research at Nirmal Bang Securities. “IRCTC has restored service charges from September, which will lead to handsome profit in the near term. This, we believe, was not factored in the issue price. The stock is reasonably priced, and upside may be limited from here on,” Jain said.
Astha Jain of Hem Securities said the stock has potential to offer good returns in next one year, and, thus, advised investors to book profit only partially.
Devang Bhat, analyst at ICICI Direct, said he would not recommend a fresh ‘buy’ on the counter. “But we would advise investors to hold on, because after the aberration of doubling profit, IRCTC has the potential to rise 8-10 per cent. People can buy on dips,” he said.
“IRCTC has a very unique business model. It has a monopoly in catering, e-ticketing and package drinking water. There is an aberration in e-ticketing, as the government had stopped it from charging service charge of Rs 15 and Rs 30 for non-AC and AC tickets. Going forward, it might be able to charge that. That will almost double their revenue to around Rs 240 crore to Rs 450 crore by FY21,” Bhat said.
“It will be a major delta in PAT. Combined with the lower tax rate, PAT will almost double. In the packaged drinking water space, IRCTC is going to set up 10 more plants. So, it will almost double capacity, and thus double market share from 45 per cent to 85 per cent. A monopolistic business, a great market share and a higher delta in margins are major drivers for this stock. While returns might be capped in the near term, it is a good long-term bet,” Bhat said.
At 12 pm, the scrip was trading 126.14 per cent higher at Rs 723.65 on BSE.
S Ranganathan, Head of Research at LKP Securities said that IRCTC is a high quality business, with a clear runway for growth, which leaves a lot on the table for investors.