Indian Railway Catering and Tourism Corporation Limited - IPO Note

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Hospitality & Tourism


Indian Railway Catering and Tourism Corporation Limited

Hospitality & Tourism

September 27, 2019

Rating: Subscribe

Sensex: 38955.62

CNX Nifty: 11580.80



Price range
Rs. 315 - Rs. 320
Issue Period
Sep 30, 2019 to Oct 3, 2019


September 27, 2019



CNX Nifty







Issue details

Face value (Rs.)
Rs 10
Market lot
40 Equity Shares and in multiples thereof
Issue size
Rs 645 Crores
Public Issue
2.01 crore shares
Market cap post IPO
5120 Crore
Equity Pre - IPO
16 crore shares
Equity Post - IPO
16 crore shares
Issue type
100% bookbuiding

Shareholding (Pre IPO)


Shareholding (Post IPO)


+91 22 6639 3000

Only authorised entity by the Ministry of Railways to offer Railway tickets online:
IRCTC is the only entity authorized by Indian Railways to offer railway tickets online through their website and mobile application, "Rail Connect". Between Fiscal 2014 and Fiscal 2019, online rail bookings have registered an approximately 12.5% CAGR, with e-booking penetration rising to approximately 70% in Fiscal 2019. This segment fetches around 60% margin.

Convenience Fee for online tickets:
Government had initially waived off the service charge of Rs20/40 (50% shared with government) for Non AC and AC segment in 2016. Compensation of cost amounting Rs 80 crore and Rs 88 crore was received in FY18 and FY19. However the Ministry has decided to stop paying compensation and allowed company to restore Convenience fee on e-tickets booked through its website. The convenience fee will be charged at Rs 15 per ticket for non-AC class, Rs 30 per ticket for AC class and Rs10/20 for transactions through BHIM and UPI. This convenience fee will be retained fully with IRCTC which will flow straight to the bottom-line.

Authorised catering service provider to passengers travelling by Indian Railways:
IRCTC is the only entity authorized to manage the catering services on board trains and major static units at railway stations under the Catering Policy 2017. Business is done through various modes like Mobile (onboard –catering to 350 trains), Static (At the railway stations eg Jan Ahars, Cell Kitchens, Refreshment rooms etc) and e-catering (Food on track app with +700 partnered restaurants). With increased awareness of e-catering business and more number of static and mobile pantries in line, overall this segment is expected to grow by 9-10%. Currently this business fetches decent 11-12% margins.

Comprehensive tourism and hospitality service provider in India:
Domestic and International Tour and travel package along with air ticketing is the major contributor to this segment. Also various themed train tours like Maharaja Express (7- star premium segment), Buddhist Circuit Special and Ramayana etc are fetching good growth. Additionally, IRCTC is one among the 3 entities (others are M/s Balmer Lawrie & Co Ltd and M/s Ashok Travels & Tours,) permitted by the GoI to offer air ticketing service to different ministries at both the Central and State Government level. To facilitate service to these central and state ministries, IRCTC has introduced an advance rolling deposit system, whereby they issue air tickets to the extent that the costs have been prepaid by the respective ministries. They have also developed a “Corporate Tool” that enables corporates to issue tickets themselves from their own premises.

Exclusively authorized for manufacturing and supplying packaged drinking water at railway station and trains:
IRCTC is the only entity authorized by the Ministry of Railways to manufacture and distribute packaged drinking water at all railway stations and trains, subject to availability of Rail Neer. IRCTC has planned to commission more 10 plants by FY21 which would enable them to cater 80-85% of demand and gain market and fill the demand-supply void. Hence, this segment could bring in growth of 12-15%. This segment fetches 15-16% margins.

New Business Venture:
As a part of plan by the Ministry of Railways to privatise passenger train operation, IRCTC has received mandate to trial run passenger trains between Lucknow and Delhi w.e.f October 2019 and the second route between Ahmedabad and Mumbai sometime later. IRCTC has the authority to decide the fares and service levels. It has planned to provide free insurance cover of Rs 25 lakhs, waiting charges of Rs 100 per hour and high-class amenities. Haulage charges would be paid to government as a maintenance cost. Currently, they are going to take the rake on lease and would buy it later based on the success of its new venture (as a part of its 10 year deal). IRCTC is expected to earn at least Rs 50 crore a year from the two trains mainly through fares and catering and advertisements. It will break even at 72% occupancy levels. The pricing structure would be dynamic (10% higher than Shatabdi and 40/50% lower than economy class air fares).

Robust operating system and internal controls: IRCTC has a robust operating system and internal controls that have enabled them to deliver quality products and services to their customers across different segments of their operation. Over the years, they have implemented several well-tested systems and internal controls procedures.

Qualified and experienced employees and management team:
IRCTC has a qualified and trained employee force to service their customers. As of August 31, 2019, they had 1,384 full time employees across their business verticals including more than 350 graduates from the Institute of hotel managements and Food Craft Institutes with expertise in hospitality industry. They have also trained heir senior officials in various topics e.g. Data analytics, operation and supply chain management, finance and non-finance, developing communication competencies.


Total railway passenger traffic has remained nearly flat over the past four years whereas total railway freight traffic registered a 2.5% CAGR during last four years. Growth in freight traffic was majorly driven by strong freight demand from coal, pig iron and finished steel, iron ore, and container service during the four years. Government introduced measures to increase freight traffic, with an objective of increasing the share of Indian Railways (IR) in freight transport across India. Government announced the Eastern and Western Dedicated Freight Corridors (DFC), which aims to cut down on the turnaround time between importing and consuming destinations through construction of a railway network specialised for freight traffic.

As per the National Restaurant Association of India (NRAI), the food services industry was estimated at Rs 3.09 trillion in fiscal 2016, and has grown at a ~11% CAGR to reach Rs 4.24 trillion in fiscal 2019. The growth was driven by growing young population of India, rising disposable incomes, uptick in discretionary spending on eating out, and growing number of women in working population. Increasing availability of restaurants offering variety of cuisines along with the proliferation of food-ordering platforms has also aided growth of the food services and catering industry


Increase in Air-Traffic: Of late, railway traffic has been flat while the air traffic has been growing in double digits owing to low air fares by no frill carriers. If there is a general trend among travellers to shift to air traffic resulting from low air fares which can happen if crude prices remain on the lower side with significant increase in capacity with the airlines, this might impact top line.

Business and revenues are substantially dependent on Indian Railways. Any adverse change in policy of the Ministry of Railways may adversely affect the business and operations.

Failure to manage online security, security of customers’ personal information and credit card fraud may expose the company to litigations and liabilities

Company Description

Indian Railway Catering and Tourism Corporation Limited (“IRCTC”) is a Central Public Sector Enterprise wholly owned by the Government of India under the administrative control of the Ministry of Railways. IRCTC is the only entity authorized by Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India. IRCTC was incorporated with the objective to upgrade, modernize and professionalize catering and hospitality services, managing hospitality services at railway stations, on trains and other locations and to promote international and domestic tourism in India through public-private participation. IRCTC is conferred the status of Mini – ratna (Category-I Public Sector Enterprise) by the GoI, on May 1, 2008.

IRCTC operates one of the most transacted websites,, in the Asia-Pacific region with transaction volume averaging 1.5 to 1.8 crores transactions per month during the three months ended June 30, 2019. They have also diversified into other businesses, including non-railway catering and services such as e-catering, executive lounges and budget hotels, which are in line with their objective to build a “one stop solution” for their customers. Currently, they operate in 4 business segments, namely, internet ticketing, catering, packaged drinking water under the “Rail Neer” brand, and travel and tourism

I. Internet Ticketing
IRCTC is the only entity authorized by Indian Railways to offer railways ticket online, and their website attracts a significant number of web visitors on a daily basis. In Fiscal 2019, an average of approximately 0.14 crore passengers booked their tickets online for travel on Indian Railways on a daily basis which consisted of approximately 71.42% of Indian Railways' tickets booked online. Such web traffic provided IRCTC with opportunities for cross-selling and possibility to generate revenue through value added services. According to CRISIL, annual online train bookings are expected to grow from 28.4 crore bookings in Fiscal 2019 to 42.5-43.5 crore in fiscal 2024. Their internet – ticketing system is designed and operated in conjunction with CRIS. The booking of railway tickets through their website is now available 24 hours per day, 365 day per year, except for routine daily maintenance from 23:45 hours to 00:20 hours. The main objective behind the introduction of the internet ticketing was that instead of requiring passengers to be physically present at the Passenger Reservation System (“PRS”), the PRS should be brought to the door steps of passengers.

II. Catering
The company provides food catering services to Indian Railway passengers on trains and at stations. On-board catering services are referred to as mobile catering and catering services at stations are referred to as static catering. Pursuant to the catering policy issued by Ministry of Railways dated February 27, 2017, (“Catering Policy 2017”), they provide catering services for approximately 350 pre-paid and post-paid trains and 530 static units. They provide catering services through mobile catering units, base kitchens, cell kitchens, refreshment rooms, food plazas, food courts, train side vending, and Jan Ahaars over the Indian Railways network. All other catering units, such as refreshments rooms at stations categorized at B or below, AVMs, milk stalls, and trolleys are managed by zonal railways. They also offer e-catering services to passengers through their mobile application "Food on Track" and their e catering website, They also operate executive lounges, budget hotels, and retiring rooms for the convenience of the travelling passengers on Indian Railways.

With the Catering Policy 2017, the responsibility for the entire catering services on all mobile units having pantry car service from Indian Railways, as well as part of static catering services of Indian Railways have been handed over to IRCTC, and are planning to roll out at least 10 new pantry cars in Fiscal 2020 once the design is approved by Indian Railways.

III. Packaged Drinking Water (Rail Neer)
IRCTC are the only entity authorized by the Ministry of Railways to manufacture and distribute packaged drinking water at all railway stations and on trains. They manufacture and distribute packaged drinking water under brand “Rail Neer”. IRCTC has 10 operational Rail Neer plants, out of which Rail Neer Plants at Amethi, Parassala, Hapur, Ahmedabad, and Bhopal are under PPP mode. It has an installed production capacity of approximately 1.09 million litres per day, which caters to approximately 45% of the current demand of packaged drinking water at railway premises and in trains. To increase our presence in the packaged drinking water market at railway stations, and to meet the growing demand, they are setting up new Rail Neer plants at Sankrail, Jagi Road, Nagpur, Bhusawal, Jabalpur, and Una. They also have installed water vending machines (“WVMs”) at railway stations to provide purified, chilled and portable drinking water to railway passengers at an affordable price. With improving awareness on health and hygiene, increased tourism, and the easy availability of packaged drinking water, per capita consumption of packaged drinking water in India is on the rise.

IV. Travel and Tourism
IRCTC has been mandated by the Indian Railways to provide tourism and travel related services. The various tourism services offered by them include Luxury Train Tours Maharajas’ Express, Buddhist Circuit Special Train, Bharat Darshan Special Tourist Trains, theme based tourist trains, Rail Tour Packages, international and domestic air packages, land tour packages, hotel booking, car rental, LTC tours and event management. They are a one stop shop for all travel and tourism related services, and operate their own tourism portal, through which they offers these products and services.

Profit & Loss Statement:- (Consolidated)

(Rs. Crores)

Income Statement Mar-17 Mar-18 Mar-19
Revenue from operations 1535.00 1470.00 1867.00
Cost of material consumed 111.60 99.10 93.30
Purchases of Stock in trade 115.50 158.10 30.90
Manufacturing expenses 237.70 67.00 61.20
Employee Benefit Expenses 163.80 192.10 195.00
Expenses of Catering Services 78.00 246.20 639.10
Expenses of Tourism 415.50 305.20 309.00
Other Expenses 100.30 129.80 167.10
Total Expenses 1222.40 1197.50 1495.60
EBITDA 312.60 272.50 371.40
EBITDA margin(%) 20.40% 18.50% 19.90%
Depreciation 22.40 23.60 28.60
EBIT 290.20 248.90 342.80
Other income 67.40 99.00 88.70
Interest cost 2.50 2.90 2.30
Profit before tax 355.10 345.00 429.20
Provision for tax 125.90 124.90 157.30
Profit after tax 229.20 220.10 271.90
PAT margin(%) 14.90% 15.00% 14.60%
EPS 14.32 13.79 17.04
Source: Stockaxis Research, Company Data


We have a positive outlook for the company based on parameters such as strong earnings profile, diversified business segment, healthy return ratios, debt-free status and monopoly business. Inclusion of convenience fee on railway tickets, setting up of 10 water plants in next 2 years and recent tax reduction of corporate tax bodes well for EPS (earnings per share) growth. IRCTC is currently trailing at 18.8x FY19. We are optimistic on the long term growth prospects of the company and thus we recommend our investors to subscribe to this issue.

Key Information:

Use of Proceeds:
The objects of the Offer are: (i) to carry out the disinvestment of 2.01 crore Equity Shares by the Selling Shareholder constituting 12.5% of their Company’s paid up Equity Share capital and (ii) to achieve the benefits of listing the Equity Shares on the Stock Exchanges. The Company will not receive any proceeds from the Offer and all proceeds shall go to the Selling Shareholder

Book running lead managers:
IDBI Capital, SBI Capital Markets, Yes securities

Mahendra Pratap Mall, aged 58 years, is the Chairman and Managing Director of our Company since September 18, 2017. Prior to that, he was working with our Company as a Director Finance since January 21, 2013. He holds a bachelor’s degree in Science and a master’s degree in Arts (political science) from University of Allahabad. He also holds a diploma in national management programme from Management Development Institute, Gurgaon and was an officer of Indian Railway Accounts Service. He is experienced in accounting and finance sector. Rajni Hasija, aged 56 years, is the Whole-time Director (Tourism & Marketing) of our Company since May 18, 2018. She holds a bachelor’s and master’s degree in Science from University of Delhi. Narendra, aged 50 years, is the Director (Finance) of our Company since August 19, 2019. He holds a bachelor’s degree in Arts and a master’s degree in History from University of Delhi. He holds a post graduate diploma in public policy and management from Indian Institute of Management, Bengaluru.