Why IRCTC Share Price is Rising

It's the holiday season and you and your friends spontaneously decide to go on a mini vacation. The first thing that pops into your mind is booking tatkal tickets on IRCTC.

After all, railways is the most budget-friendly way to reach your destination.

And that's not just your sentiment. This is what every other traveller believes. Hence, IRCTC's website is the most highly transacted website in the Asia-Pacific region, with more than 34.5 million (m) transactions per month and 6.27 m logins per day.

In 2022, an average of over 1.1 m tickets were booked daily through IRCTC's website and mobile app.

It's no surprise that IRCTC has hailed as the Mini Ratna of the railway sector.

IRCTC share price is on a continuous upward rally, surging by over 8.5% in a week and 18% in a month.

Now, the question is what's fuelling this sudden upward surge in the stock and will it last?

Let's find out...

#1 IRCTC Expanding its Non-Railway Catering Business

We all know that the company generates majority of its revenue from its primary business of e-ticketing. Apart from this, the company is engaged in catering, travel and tourism, and packaged drinking water.

Now, to expand its business further, the company has announced its plans to become a premier brand in hospitality and catering in India.

The company is looking to broaden its catering operations across India and is in discussions with various government organisations and industrial houses to set up catering units.

IRCTC has signed memorandum of understanding (MoUs) with government and autonomous bodies, including defence establishments like the Border Security Force, Indian Maritime University in Kolkata, and Cotton University in Guwahati.

IRCTC is also actively commissioning 15 more catering units across the country in the near future.

All of this will help IRCTC to broaden its revenue streams beyond the e-ticketing space. More so, investors are optimistic about the company's future and hence the company is on the upward trajectory.

#2 Indian Railways Plan to Acquire New Trains

You see, the passenger traffic is increasing as years are passing by, hence, it is important for railways to expand its capacity as well.

Keeping that as a focus, railways have announced plans to acquire new trains at an estimated capex of Rs 1 trillion over the coming years.

This capital will be used to replace old trains with about 7,000 to 8,000 new ones.

To make this happen, the government will invite companies to bid for the job of building these new trains. The process will start in the next 4-5 years, and once a company is chosen, they will have around 15 years to deliver the new trains.

The aim of this move is to increase availability of trains and the number of trips.

Now, at first glance, the move will benefit other railway ancillary companies like Titagarh Wagon and Texmaco Rail which are involved in manufacturing wagons and coaches. However, in the long run, IRCTC will stand to benefit too.

Let's understand how. You see, with the addition of new trains and number of trips, the overall capacity of the railway network is expected to increase. This can result in more travellers using IRCTC's services for e-ticketing, catering, and tourism-related offerings.

Moreover, the long-term nature of the train procurement plan (15 years) provides IRCTC with a stable and extended period to plan its services and offerings in alignment with the increasing needs of passengers.

#3 Monopoly Business and Strong Revenue Growth

When it comes to railway tickets, the only company we hear of is IRCTC because it is the only entity that is authorised by the Indian Railways to offer railway tickets online, run catering services, and sell bottled water across all railway stations and trains in India.

Basically, IRCTC is a monopoly business. And if there's one thing investors love is investing in a monopoly business.

So, whatever the company does for growth, it will bear its benefits too, as there is nobody else to grab a piece from its market share.

This is why when the company is in news, investors flock on to buy shares of IRCTC which makes its stock price rally.

Moreover, in the September 2023 quarter, the company reported robust financial performance. Its revenue from operations grew 23% to Rs 9.9 billion (bn) compared to Rs 8 bn recorded during the same quarter last year.

On a sequential basis, the profit after tax (PAT) grew 27%.

The growth can be attributed to the spike seen in its tourism business, which saw a revenue surge of 39% in the September quarter as compared to the same period last year.

The catering segment was the second major contributor, with revenue soaring by 29% in the quarter under review as compared to the same period last year.

Moreover, the company also recently announced a tie up with Zomato for catering services, starting with a pilot agreement. The management believes that the volume and earning patterns from this agreement will be clearer in the next quarter.

Revenue from its e-ticketing space recorded a 9% increase to Rs 3.3 bn and packaged bottled water segment recorded a 4% increase, year on year (YoY).

The management also mentioned that the company has added 11 pairs of Vande Bharat trains and 18 new static catering units which will drive growth going forward.

What's Next?

IRCTC generates a majority of its revenues from its ticketing segment, especially online ticketing.

The company believes that with the rise in number of internet users, this segment will see multifold growth by 2025.

Similar is the case with digital payments. As more potential customers choose digital payment methods, the company's e-ticketing business will expand.

In the September quarter, 38% of tickets were booked using UPI which shows an increasing trend in digital transactions.

Apart from this, IRCTC wants to create a one-stop platform for all train-related services for passengers.

To achieve this, they plan to enhance their IT capabilities and collaborate with industry partners to use advanced technologies like artificial intelligence and machine learning.

They aim to move from traditional systems to a more flexible and cost-effective public cloud platform in the next two years.

This shift will allow them to integrate cutting-edge technology and provide personalised services to customers.

From a macro picture, stocks from the overall railway sector have been a boon to investors this year.

This was due to several reasons like huge capital outlay during budget, infrastructure development and FDI inflows...and IRCTC was one among them who benefited from this move.

How IRCTC Share Price has Performed Recently

IRCTC share price has gained 8.5% in the last five days and more than 29% in 2023 so far.

The company touched its 52-week high of Rs 835 on 18 December 2023 and its 52-week low of Rs 557 on 29 March 2023.

Foreign Institutional Investors (FIIs) have increased their stake by 1.5% on a year on year (YoY) basis.

As of the September quarter in 2023, FII now accounts for 7.1% of the company's stake, a notable increase from the 5.8% stake they held during the same time last year.

On the other hand, Domestic Institutional Investors (DIIs) have also increased their stake by 5% YoY from 5.5% to 10.5% in the recent September quarter as compared to the same period last year.

Explore the detailed shareholding pattern here.

About IRCTC

IRCTC is a Mini Ratna railway company and is the sole entity authorised by the Indian government for online railway ticketing, catering, and packaged drinking water services on trains and at stations.

In the financial year 2022, IRCTC booked an average of 1.1 m tickets daily, totalling 417 m tickets. With 391 pantry cars and additional train-side vending services, catering is a significant part of its operations.

The company generated 54% revenues from internet ticketing, 27% from catering, 9% from Rail Neer (packaged drinking water), 8% from tourism services and 2% from State Teerth.

For more details about the company, you can have a look at the IRCTC fact sheet and quarterly results on our website.

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