Rail, Regime and Retail: The IRCTC Drama
Unfolding the complete story around the rise, fall, rise, fall and again the rise of IRCTC!
A perfect script of a business movie got scripted in last two months with one of the biggest monopolies of India. It’s none other than IRCTC playing the lead hero, government playing the villain and the retail investors paying the increased cost of watching the movie in multiplex along with large popcorn…. :p
So here goes the script – A new fan boy of Indian railways got listed on the bourses on 18th Oct’19 with 100% premium. It was like a golden run for the monopoly firm wherein in just 5 months the stock reached to the levels of INR 1900 in just 4 months. That’s a whopping 500% increase from IPO allotment price. Just take some time to process such high numbers!
However, the party ended too soon. Just like the entire nation, IRCTC also went into a sweet somber during COVID. People stopped travelling and the stock prices tanked from INR 1900 on 24th Feb’20 to INR 770 on 25th March’20. That’s a fall of 60% - Mount Everest to Aravalli Hills!
Thanks to the quick rebound of markets, there was a great recovery in the fanboy stock price too and the stock settled around 1400 levels in next 2 months (May’20). Next 1 year the script became slow with consolidation between 1500 – 2000 levels just like a typical Bollywood movie becomes during the middle minutes. Suddenly the movie started to take a turn, economy started to recover, and our superstar got onboarded on the bullet train from a slow-paced train. From July’21 to Oct’21, the stock zoomed from INR 2000 to INR 6000 – 3x returns once again! If somebody would have been able to time the market s’he would have definitely become a millionaire by now. The poster boy was getting praises from all the directions. Perfect happy ending, right?
Nopes, climax abhi baaki hai… Seeing such high demand from the investors, the government decided to split the shares of IRCTC in the ratio of 1:5. It wanted more people to join this bandwagon by reducing the share price and increasing the trades. More people – more volatility. So, recently on 28th October’21, the stock split and the price came down in proportion to INR 810 with still a day’s close of close to 900. The hype was intact, but the plans of government were of something else. On the evening of 28th October’21, the Central Government released a notice stating that 50% of the ticket booking revenues of IRCTC would be shared by Govt. MASTERSTOKE!
67% of revenues of IRCTC come from ticket booking and 50% of that would go to Government. That’s like taking a lion’s share from the profits and leaving shareholders with pennies. The shareholders felt cheated by Government and as soon today the markets opened, the stock tanked by 25%... Uff from 900 to 635 levels. So much drama! The retail investors started cussing the Government, and even the Government started feeling the heat because with the increased price Govt. was sitting with a major stake in a 7300 Cr. valuation company whose market cap erosion would automatically would have hurt the government only. In a sudden remark, within next two hours, Govt. reversed its decision of sharing the revenue of IRCTC and the stock started to rise again covering all the losses and closing at 850 levels. Whoa…
The drama might seem to cease over here, but it was the retail investors who got butchered badly. Entered at highest levels and sold at lowest levels. Not to forget, the starboy got dented badly by Government and would be very difficult for it to regain the same glory, because the trust once lost is the most difficult to gain. Nevertheless, let’s wait for 1st November when the quarterly results of the company would be announced. That day sentiment and movement might be the final nail in the coffin that day.
Fingers Crossed!
By: Anmol Gupta | Isha Garg