Stock Mantra | This rail stock increased investor wealth 10-fold in 2 years, could hit Rs 5,000 in 6–8 months
As the economy reopens, public transportation is expected to increase, benefiting the railways. Investors are also anticipating a stock split. Avaneesh Parasar.
Indian Railway Catering and Tourism Corporation (IRCTC) turned out to be a blockbuster wealth creator for investors holding shares from its initial public offering two years ago, with the stock appreciating a little more than 10-fold from the issue price of Rs 320.
It had a bumper debut and closed at Rs 728.60 on the BSE on October 14, 2019. The IRCTC share closed at Rs 3,288.65 on the BSE on September 7, after climbing to a record high of Rs 3,305 intraday amid strong volumes.
In this period of almost two years, the S&P BSE Sensex has rallied 53 percent and the S&P BSE MidCap Index 77 percent.
IRCTC shares have rallied 132 percent so far this year, compared with a 22 percent gain by the Sensex and a 36 percent increase in the MidCap index, being one of the latest entrants in the list of multibagger stocks of 2021.
IRCTC’s market capitalisation reached Rs 52,618.40 crore on September 7, and it is now among the top 100 companies by this measure.
After a consolidation in mid-August, the stock got off to a good start on August 24 and has rallied 29 percent since then.
The reopening of the economy, easing of Covid-19-related restrictions, the asset monetisation plan of the railways, expansion plans in the hotel sector, and IRCTC’s monopoly in railway e-ticketing and supply of packaged drinking water have helped drive the rally in the stock price, experts said.
“It is also tying up with local food suppliers, which means the IRCTC management is in a mood to emerge as an A-to-Z solutions provider in the hospitality sector,” said Mohit Nigam, head — PMS, at Hem Securities.
Tourism was one of the worst-affected sectors due to the pandemic and also affected state-owned IRCTC, which provides services such as online ticketing, catering and selling drinking water. The company also operates food plazas at some stations, manages waiting lounges, retiring rooms and budget hotels in partnership with private entities and organises package tours. The company was affected to some extent by the pandemic-induced curbs.
“During the nationwide lockdown, when all other modes of transportation were shut down, the railways performed a critical part in the nation’s logistic supply. As a result, the company’s losses during that period were contained to a minimum,” said Gaurav Garg, head of research at CapitalVia Global Research.
He said with the reopening of the economy, public transportation is expected to increase, benefiting the railways.
“IRCTC recently decided to enter the cruise business for the first time, focusing on both the domestic and international market, and has signed an agreement with Cordelia Cruises,” Garg said.
The rally may also have been on account of a stock split proposal. On August 12, IRCTC recommended splitting each equity share with a face value of Rs 10 into five shares with a face value of Rs 2 each, subject to approval of the Ministry of Railways and shareholders. The company’s annual general meeting is scheduled on September 29.
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