What has happened?
- Indian Railway Catering and Tourism Corporation Ltd (IRCTC) has become the ninth public sector entity to join the elite club of ₹1 trillion market capitalization (m-cap) with its shares surging over 300% so far this year.
- The stock hit a record high of ₹6,287.95, gaining as much as 7.1%.
- At 9.20 am, the scrip was trading at ₹6,283 on the BSE, up 7% with its m-cap at ₹1.01 trillion.
- Earlier, PSU stocks such as State Bank of India, Coal India, NMDC Ltd, Indian Oil Corp. Ltd, Power Grid Corp. Ltd, SBI Life Insurance, Bharat Petroleum Corp. and SBI Cards have achieved this milestone.
- Established on September 27, 1999 as a public sector undertaking (PSU), the Indian Railway Catering and Tourism Corporation, was, till 2019, completely owned by the Government of India through the Ministry of Railways.
- However, the Union government continues to be majority shareowner. IRCTC provides services such as online ticketing, catering and tourism for Indian Railways.
- IRCTC listed on 14 October 2019 on exchanges and its issue price was ₹320 a share.
- Since then, the stock has surged over 18-fold or 1,737%.
- So far this year, it has gained 308.1% and so far this month it has advanced 58%.
What’s fuelling the rally?
- The reopening of the economy improved outlook for the ticketing business.
- Train ticket booking during the July to September 2021 quarter has almost doubled.
- This is expected to reflect in strong quarterly numbers as IRCTC has almost monopoly business in online train ticket booking, said an analyst.
- “IRCTC is a pure monopoly business in 2 out of its 4 operating segments, namely Internet Ticketing and Rail Neer,” brokerage firm Dalal & Broacha Stock Broking said in a recent report.
- Much of the enthusiasm for IRCTC over the past year has also been driven by the fact that it is an Internet platform business,
- That deserves the same, if not better, valuations than loss-making online platforms like Zomato and CarTrade Tech.
Role of retail investors
- What is unique about this move in the IRCTC shares since July is the fact that retail investors have been the driving force and have captured all the gains,
- Whereas institutional investors caught the exit bus on what can only be described as ultra-conservatism.
- In the quarter ended September, retail holding in IRCTC grew by 291 basis points to 14.17%.
- At the same time, both mutual funds and foreign investors turned net sellers on the counter.
- “There are new kids on the Street. They want to go to the penthouse, they are not going to get there, buying old stocks.
- So, they are going to buy riskier, emerging companies. It is a big potent force. Do not underestimate its power,”
- Shankar Sharma, vice-chairman and joint managing director at First Global told ETNow in a recent interview.
Q) The IRCTC share will split into five (5) equity shares. Which of the following is nottrue about stock splits?
- The market price per share is reduced after the split
- Proportional ownership is unchanged
- The number of outstanding shares increases
- None of the above