New Delhi / IRCTC shares more than double over IPO price in best India listing in 2 yrs

IRCTC more than doubled on the first day of listing, the best debut for a local company since 2017, after its public float emerged as the most sought after for the nation’s state-run firms. Lured by IRCTC’s monopoly status, investor demand exceeded shares on offer by 112 times, eclipsing the government-owned Housing & Urban Development Corp. and Cochin Shipyard Ltd., whose maiden offerings were oversubscribed more than 75 times in 2017, a record year for Indian IPOs.

The company garnered ₹643 crore ($91 million) for the government, which sold 20.1 million shares, or a 12.5% stake, in a price band of ₹315-320 apiece. IRCTC’s IPO is also the biggest and the most successful among the four companies from the Indian Railways stable that have gone public.

Key Insights

The company’s core business is spread across four verticals -- railway catering, tourism services, online ticketing and packaged drinking water. It is the only authorized firm by the Indian Railways to provide these services in trains.

Catering service is the largest contributor to IRCTC’s top line and the company controls about half the bottled water sold on stations.

Even so, it is internet ticketing that adds the most to its bottomline. About three-quarters of 1.4 million people who traveled by train daily in the April-to-August period booked tickets online.

“It is a unique IPO as most of IRCTC’s businesses are a monopoly," said Abhimanyu Sofat, head of research at Mumbai-based IIFL Securities Ltd. “There are future levers of growth in terms of the fee charged on the ticket booking and packaged drinking water."

Starting Sept. 1, the company has resumed charging a fee on tickets booked online, which is expected to add 4.5 billion rupees to revenue annually, said Arafat Saiyed, analyst at Mumbai-based brokerage Reliance Securities Ltd.

Market Reaction

IRCTC’s shares surged as high as ₹698 versus the sale price of ₹320, the best performance by a debutante since 2017. The premium valued the company at $1.5 billion at 10:52 a.m. in Mumbai

Before IRCTC, Avenue Supermarts Ltd., owned by Indian billionaire Radhakishan Damani, more than doubled on listing in March 2017 after the company’s IPO got bids for 106 times the quantity offered.

Some of the top gainers among mainboard IPOs since January 2017 are:

Company Offer Price (Rs.) Debut Gains (%)

Avenue Supermarts Rs 299 114%

Central Depository Rs 149 75%

HDFC AMC Rs 1,100 65%

Dixon Technologies Rs 1,766 64%

AU Small Finance Bank Rs 358 51%

The stellar response may help bolster the government’s drive to raise a record ₹1.1 trillion ($14.8 billion) selling state firms this financial year, though not all share sales will elicit a resounding response.

“IRCTC is an exception because of the quality of businesses it offers," IIFL’s Sofat said. “This can’t be said for every government company."

IRCTC’s debut is a bright spot in India’s IPO market that has seen 11 issuers raise a little over 100 billion rupees in the first nine months of the year, the fewest issuers since 2014, according to PRIME Database. That compares with about 310 billion rupees raised via 24 public floats in 2018.

More than 20 companies shelved IPO plans this year, thanks to the general election in May and as the lingering crisis in the nation’s credit market damped risk appetite.