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Too high too fast? IRCTC on a roll, but run may not last

IRCTC’s performance is in contrast with other PSU IPOs.

, ET Bureau|
Oct 24, 2019, 07.48 AM IST
IRCTC made a bumper debut on October 14 and more than doubled over its issue price on the first day of listing.
Mumbai: Shares of Indian Railways Catering and Tourism Corporation (IRCTC) have nearly trebled in less than two weeks of listing as investors continue to take advantage of the attractive pricing and monopolistic nature of business.

The stock ended up 6.5 per cent at Rs 900.40 on Wednesday after touching a high of Rs 909.50 during the session.

The last company to surge three times over its issue price in less than two weeks was Astron Paper & Board in January 2018, with the company achieving the feat in seven sessions.

IRCTC’s performance is in contrast with other PSU IPOs. In the recent past public sector IPOs have not measured up to investor expectations. Of the 12 PSU IPOs which have debuted since 2017, eight are trading below issue price.

IRCTC made a bumper debut on October 14 and more than doubled over its issue price on the first day of listing.

Its Rs 645-crore IPO earlier this month was subscribed nearly 112 times, making it the best subscribed IPO since Apollo Micro Systems and Amber Enterprises India in January 2018, both of which were subscribed over 100 times.

Analysts said the stock’s higher valuation is because investors are likening the company to an e-commerce one. A reversal in this bullish momentum may be on the cards for the stock as it has run up “too much, too fast”, according to some market participants.

“IRCTC is being viewed as an ecommerce play which is why the valuation has surged to around 30 times PE. But it is difficult to justify these valuations,” said Geetanjali Kedia, senior research analyst at “One should book profits at these levels,” said Kedia.

IRCTC earned a total revenue of Rs 1956.66 crore in FY19, up 24.66 per cent over the previous financial year while operating profit grew 24.4 per cent to Rs 429.96 crore in FY19.

“I was expecting the stock to touch Rs 1000 in 12-18 months but it has run ahead too fast, probably because of the scarcity premium. Right now there is ambiguity in so many sectors,” said Kush Katakia, founder, Beanstalk Advisory.

“Closest comparison for IRCTC is MakeMyTrip and the stock could surpass MakeMyTrip’s valuation of $2.2 billion. It has run up too much, too fast so a correction till Rs 830 levels can happen,” said Katakia. Over the next three-four years, the company is likely to generate strong free cash flow, said Katakia.
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