IRCTC Shares: Indian Railways catering services provider, IRCTC shares plunged over 5 per cent on Thursday as the government announced that it will sell up to 5 per cent stake in the Indian Railway Catering and Tourism Corporation (IRCTC) through an offer for sale (OFS) on the exchanges on Thursday and Friday.
The floor price for the share sale is set at Rs 680 per share, which is 7.4 per cent lower than the company’s closing price of Rs 734 on Wednesday.
IRCTC is the tourism and catering arm of the Indian Railways. At present, the government owns 67.4 per cent stake in IRCTC.
The stake sale will mop up close to Rs 2,720 crore, offering the government some cushioning as it chases to meet its disinvestment target of Rs 65,000 crore for the current fiscal year (2022-23, or FY23) ending March.
The proposed share sale will include up to 20 million equity shares of IRCTC, representing 2.5 per cent of the total issued and paid-up equity share capital, with the option to additionally sell 20 million shares (constituting 2.5 per cent paid-up share capital of the company in case of oversubscription), the company said in a regulatory filing on Wednesday.
The offer for sale is carried on both BSE and NSE.
Axis Capital, Citigroup Markets India, and JM Financial Institutional Securities are the brokers for the government to carry the OFS.
The government has set a floor price of Rs 680 per share which is at a discount of 7.44 per cent from Wednesday’s closing price on BSE.
What Investors Should Know?
On December 15, only non-retail investors will be allowed to place their bids under the OFS. The bidding will take place during the trading hours of the market.
However, non-retail investors also have the option to carry forward their unallotted bids to the next day (December 16). As per the OFS guidelines, these non-retail investors can also revise their bids on the next day.
Notably, a minimum of 25 per cent of the OFS is reserved for mutual funds and insurance companies subject to receipt of valid bids at or above the floor price. In case of under-subscription from these two category investors, the remaining portion will be available to other bidders in the non-retail category.
Retail investors are those individual investors who place their bids for the OFS for a total value not exceeding Rs 2 lakh across stock exchanges.
10 per cent of the OFS is reserved for retail investors. The exchanges will decide the number of offer shares that are eligible to be considered in the retail category based on the floor price. However, any unsubscribed portion in the retail category after the allotment to retail investors — then the leftover shares will be eligible for those non-retail investors who have chosen to carry forward their bids.
Should you Invest?
Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd., said: ” IRCTC: Counter has given a breakdown of head & shoulder pattern formation with long consolidation on the longer time frame with huge volume. The structure of the counter became distorted as it traded below its all-important moving averages, but it is in a demand zone near Rs 690. On the upside, Rs 710 is an immediate susceptible area; above this, we can expect a run-up towards Rs 740+ levels in the near term.”
Jinesh Joshi – Research Analyst, Prabhudas Lilladher Pvt Ltd, said they have a ‘HOLD’ rating on the stock with a Target Price of Rs 679.
For the quarter ended September 2022, IRCTC reported a 42 per cent rise in net profit at Rs 226 crore. Revenue from operations surged 99 per cent to Rs 806 crore in the September quarter from Rs 405 crore in the same quarter last fiscal. Its total income surged 105 per cent to Rs 832 crore in Q2FY23 from Rs 405 crore in Q2FY22.
IRCTC had a stellar debut on October 14, 2019, as it listed at Rs 644 on the BSE, a 101.25 percent premium over its issue price of Rs 320 per share. On the National Stock Exchange, the stock listed at Rs 626, up 95.6 per cent over the issue price.
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