IRCTC: 50% Fee Share

Ministry of Railways has asked IRCTC to share 50% of its revenue from convenience fee w.e.f 1^st November 2021, with the Ministry of Railways. Is this killing the goose that lay the golden egg?

Pre-covid, IRCTC’s annual revenue run-rate from convenience fee was Rs. 900 to 1,000 cr. This internet ticketing segment operates at about 80% operating margin, and more-or-less contributes to company’s entire EBITDA. If Ministry of Railways is looking to earn 50% of Rs. 1,000 cr or Rs. 500 cr annually, it is actually destroying about Rs. 37,500 cr worth m cap of IRCTC (Rs. 500 cr multiplied by PE of 75x) or value destruction of Rs. 25,250 cr worth its own holding, as Govt owns 67.4% stake in the company. All for Rs. 500 cr annual income!   

Even during the time of IPO 2 years ago, Govt missed the forest for the trees, selling 12.5% stake in the company for a song, as shares listed at 2x IPO price. As company’s m cap grew from Rs. 5,120 cr at the time of IPO to Rs. 11,712 cr after listing, Govt bore a loss of profit of a flat Rs. 612 cr, on a sale transaction of Rs. 638 cr.

IRCTC has been one of the best PSU wealth creators.

Sadly, that has just been undone!

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