Backed by strong demand from retail investors, the Rs 645 crore initial public offering (IPO) of state-owned Indian Railway Catering and Tourism Corporation (IRCTC) was fully subscribed just as the second day of subscription began.
The IRCTC IPO was subscribed 1.33 times by noon on 1 October. Data on stock exchanges showed that the offer has received bids for 26.9 million equity shares so far against the IPO size of 20.16 million shares, Moneycontrol reported.
The retail investor category has been oversubscribed 3.6 times, while the reserved portion of employees has been 1.77 times subscription. However, the non-institutional investor category has seen 45% subscription so far.
The price band of the IRCTC IPO has been fixed at Rs 315-320 per share and the bidding for the offer closes on 3 October. Retail investors as well as employees will get a discount of Rs 10 per share on the final offer price.
Strong demand for the IRCTC IPO was expected as domestic as well as global brokerages gave a big thumbs-up to the issue for its strong earnings as well as attractive valuations.
IRCTC has one of the largest customer bases in India, which will help it to push new product offerings such as executive lounges, budget hotels, and travel and tourism, said brokerage firm PhillipCapital, which recommended subscribing the issue.
“We like the business model, strong customer base, and increasing wallet share – which should lead to higher than growth, margins, and return on capital employed (RoCE),” it said.
IRCTC operates in four business segments—internet ticketing, catering, packaged drinking water, under the Rail Neer brand, and travel and tourism.
At the upper end of the price band, IRCTC demands PE multiple of 18.8x of FY19 EPS (earnings per share) and the recent tax reduction by government to 25.2% and an increase in revenue from service charge for online ticketing will improve profitability, said Angel Broking which also advised subscribing the issue.
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