Fundamental Analysis of IRCTC

In today’s article, we are going to discuss a public sector company that has given a 240% return to its investors in 1 year.

Talking about IPO share price, to date, this company is trading more than 4-5 times. 1 year back, its share price was Rs.1300
approximately. Today it is around Rs.4600 made a high of 6200 approx.

Talking about its services, mainly all industries must have used its services. In this article, we are going to do a fundamental analysis of IRCTC. We will be covering its fundamentals. Future Growth Prospects, Company Financials at the end, we will be suggesting whether to buy its shares or not.

Introduction

IRCTC was incorporated in 1999.
That is, it was separated from the railway and named differently to target the hospitality sector.
To give professional services to users, railways provided Hospitality services.
The company concentrates on domestic and international tours including the development of budget hotels.
The most important facility launched by the company is the online ticket booking portal via its website.
Diversifying its business, to fulfill water demand in railways, IRCTC launched Rail Neer.
IRCTC is the one and only authorized company for booking railway tickets and also for selling its packaged water on railway platforms.
On 30th June 21, the government had more than 67% holding in it. So this was the company’s history.

Also Read: Praj Industries Stock Fundamental Analysis & Fundamental Analysis of Deepak Nitrite

Fundamental Analyses of IRCTC are as follows:

Business Model

Now let’s talk in detail about its business along with its catering and hospitality.
IRCTC has differentiated in Hospitality and the catering business can be subdivided into 4 parts.

Mobile Catering Business.
Static Catering Business.
Hospitality Business.
E-Catering Business.

Mobile Catering

In Mobile Catering, the company provides catering business inside railways.
In Mobile Catering, the company has over 550 pantry cars which are mainly in Duronto, Rajdhani & Shatabdi express.

Static Catering

Static Catering, has food stores on its platform, managed and run by IRCTC.

Like Jan Aahar which is an IRCTC brand.

Hospitality businesses

In Other Hospitality businesses, the company has its executive lounge which operates in a few cities.
The company has made a few more rooms and hotels for stays to run its business.
This business segment mainly targets the waiting period of travel from 1 place to another.
This provides good service to the passengers by IRCTC.

E-Catering Business

In E-Catering, its a facility provided by IRCTC, where you can order food from an online platform.
You have Domino’s, Subway, Haldiram, Faasos, Biryani Blues, ATB, Sambhawna Bhawan, Nirulas, etc.
There are many brands to place your order via the E-Catering platform.
After catering and hospitality business, let’s talk about Online Ticketing.

Online Ticketing

This business segment is very important for IRCTC.
In the Financial year 2021, 57% contribution was from online ticketing. Why is this platform so important?
For any ticket booked in railways, 80% of the bookings are done via IRCTC. To use it, there are different mediums.
Like through application, web, and if you go agents then they also book via IRCTC.
Breaking it up, 21% of total bookings are done via the IRCTC website, 46% via mobile app,
and 33% via agents who use the IRCTC app or web.
In online ticketing, the user base of IRCTC is around 66 million.
On average in financial year 21, 1.6 lacs bookings were made per day which goes up to 4.8lacs per day as well.
So you can imagine the bookings at a daily level via IRCTC.

One more interesting fact is IRCTC launched co-branded cards with SBI in recent times.

If you book tickets via those cards, you get benefits. IRCTC has taken new initiatives to expand its customer base and business in the future.

Rail Neer

Let’s discuss Rail Neer. In IRCTC’s total revenue, it doesn’t have a big share with a 7% contribution.
Travel and tourism is a new segment where IRCTC works. On my screen, the company runs a business in both travel and tours.
It runs 25 chartered trains like Bharat Darshan, Buddhist Circuit, Deluxe Tourist, Golden Chariot, and Maharajas Express, and the Tejas trains.
These trains are specifically managed and run by IRCTC for tourism betterment in the future.
Before going to the numbers, let’s talk about insights.

Also Read: Fundamental Analysis of Newgen Software & Fundamental Analysis of Happiest Minds

Shareholding Pattern

Fundamental Analysis of IRCTC — Irctc Shareholding Pattern

In the company’s ownership, the government has more than 67%.
Here FIIs have good investments. In IRCTC, FIIs have more than an 8% stake.
Domestic institutional investors have an 11% stake. That means big players have good investments.

IRCTC’s financials

The market capitalization of IRCTC is around 52,720 crores.
Price to earnings ratio is only around 196 which is quite big. The net profit margin is 20.66%.
Return on Equity, which is an important parameter for a company’s finances, is 11.64%.
In 1 year, IRCTC has outperformed this index giving a return of 140% to its investors.
In June quarter results, the company has generated a revenue of Rs.246 crores.
Before this, the company saw a dip during the covid situation. After covid recovery, the business has expanded.
The operating profit margin of the company is fantastic which is around 46%.
1 more important piece of information- the company announced a 5:1 stock split. Someone having 1 stock will get 5 stocks,
making its share price 1/5th. It can be accessible for small players for future investment.
The company is a completely debt-free company. Their company has good cash reserves which they have collected from their business.

Growth Ratios

The revenues have grown from the level of 1059 crore by mass 15 to the level of 2275 crore by March 2020 and you can see that there is been a consistent growth in the revenues.
If you look at the profits the profits have grown from the level of 131 crores in march 2015 to the level of 529 crores by march 2020 and again the profit has been growing at a consistent rate.
So over the last five years, the revenues of Irctc have grown at a Cagr of 17% and the profit has grown at a Cagr of 32% which is simply fantastic.

Profiability Ratio

The operating profit margin of Irctc has consistently increased you can see that on March 15 it was 14% and from there it has increased to the recent level of 31% by March 2020.

Return on Equity and Return on Capital Employed

Both are well above 20% in fact in march 2020 the return on equity was 32.83% and the return on capital employed was 43.63% and it has been consistently well above 20% for the last five years.
Clearly, Irctc is not just growing at a very fast rate but it is also highly profitable the return on equity and return on capital employed is well above 30% which is simply fantastic.

Leverage Ratio

The debt to equity is consistently zero, which means there is no debt with Irctc, considering Irctc has got no debt.

Management Efficiency Ratio of Irctc

This inventory turnover has reduced for Irctc in the last couple of years and if you look at the debtors day it has been on the higher side.

Valuations of Irctc

If you look at the current price of Irctc it is trading at the level of above 4000 and if you look at the lows and high, the low was 1300 and the high was 6200. so it is sitting somewhere in between the low and high.
If you look at the overall price movement you can see that in the last few years since November it has increased from the level of 1300 to the level of approx 6200 and then due to correction it fell down and then currently it is trading at the level of 4200.
If you look at the price to earnings ratio for three year you can see that obviously, the company has got its IPO around October 19 hence since then the company has maintained a median PE of 52 and it is currently trading at a PE of 224.
Hence looking at the overall valuations of Irctc, I think the pe ratio is on the higher side and is slightly overpriced as the cold situation is not yet working there is a potential risk in the loss of revenue and profit for Irctc for the next few quarters.
Irctc is a fundamentally super strong company with a bright future prospect, if you are a long-term investor then you should consider having Irctc in your portfolio.
I am sure that in the future Irctc profitability and revenue are going to grow at a very fast rate and irctc has got all the characteristics of a multi baggager stock.

Future Growth Prospects

In the future, mobile penetration will increase which will expand IRCTC business through a few changes in its websites,
It can increase its base. The company is completely debt-free.
It’s a well-placed company that can benefit from new opportunities.
If you look at the e-booking industry in India in the last few years the online ticket booking has grown at a very fast rate and the major reason is many people are traveling all over the country.
So over the next five years, online ticket booking is expected to grow at a Cagr of almost 16 to 17% of factors such as rising internet penetration, affordable smartphone, low-cost data as well as an increase in usage of debit and credit cards are going to fuel growth in the online ticket booking.
If we discuss the packaged drinking segment in India it is expected to grow at a rate of almost 20% cagr for the next five years increasing awareness about the package drinking water for good health.
As well as the rise in per capita income has fueled the growth in bottled water in India the market size of package drinking water in India is expected to grow from 160 billion dollars in FY 18 to almost 400 billion dollars by FY23.
The average daily requirement of package bottles on the Indian railway is almost 18 lakh bottles per day and the production capacity of Irctc is around 14 lakh bottles per day.
Irctc is planning to bridge this gap and meet the demand and it has launched new water plants the travel and tourism industry in India is also growing at a rapid rate.
The foreign tourist in India has grown from 3 million in the year 2003 to almost 11 million by 2018 and it is expected to grow to around 30 million by the year 2028.
If we discuss the catering business the organized player in India has got almost 35% market share and it is expected to grow at the cagr of almost 18% for the next five years.
To cater to this growing demand Irctc is planning to cover almost 100 plus sections on the Indian railway network with train side vendors as well as many new food joint arrangements.

IRCTC’S Strengths and Limitations

IRCTC’S Strengths and Limitations are as follows:

Strengths

Company has been maintaining healthy ROE of 29.10% over the past 3 years.
Company has been maintaining healthy ROCE of 43.02% over the past 3 years.
Company is virtually debt free.
Company has a healthy Interest coverage ratio of 33.01.
The Company has been maintaining an effective average operating margins of 22.88% in the last 5 years.
The company has a good cash flow management; CFO/PAT stands at 1.05.
The company has a high promoter holding of 67.40%.

Limitations

The company has shown a poor profit growth of -4.72% for the Past 3 years.
The company has shown a poor revenue growth of -18.88% for the Past 3 years.
Company has high debtor days of 307.17.
The company is trading at a high PE of 249.
The company is trading at a high EV/EBITDA of 172.30.

Conclusion

Overall if we conclude the fundamental analysis of IRCTC has an excellent business and its management, strong competitive advantage, and good financial and bright growth prospect which makes it a fundamentally good company.

It is currently available at a fair valuation due to correction in the market. What is your take on the fundamental analysis of IRCTC have you invested in it do let me know in the comment box. I hope you find this analysis useful, and if yes please share it with your friends and family.

For more trading ideas do follow us on:

Fundamental Analysis of IRCTC | Monopoly Stock | Future Growth Stock

Introduction