Please refer to important disclosures at the end of this report
1
Indian Railway Catering and Tourism Corporation Limited (IRCTC)
is a
Central Public Sector Enterprise wholly owned by the Government of India
and under the administrative control of the Ministry of Railways.
It
operates in four business segments, namely, internet ticketing, catering,
packaged drinking water under the “Rail Neer”
brand, and travel and
tourism.
Positives: (1)
It is the only entity authorized by Indian Railways to provide
catering services
, online railway tickets and packaged drinking water at railway
stations and trains in India. 2) From September 01, 2019 Ministry
permitted Company to charge `15 for Non- AC & `
30 for AC ticket booked
online. If tickets are booked through BHIM or UPI charges are `10 & `
20 for
Non-AC and AC respectively. 3)
Market share of packaged drinking water at
railway premised and trains will
increase to ~80% from ~45% as the number of
plants will increase from 10 to 20 by CY21. 4) High dividend payout ratio
(44.89%
in F.Y.19).
Investment concerns: (1) B
usiness and revenues are substantially dependent on
Indian Railways. 2) Withdrawal of exclusivity of the Company for catering,
online
railway ticket and packaged drinking water at railway stations and trains in India
by the Ministry of Railways. 3) Adverse claims,
media speculation and other
public statements relating to the food quality, catering facilities and service. 4)
Removal or reduction of Service
Charge by Ministry of Railways or instructing
IRCTC to share part of revenue with them.
Outlook & Valuation: At the upper end of the price band, IRCTC demands
PE
multiple of 18.8x of FY19 EPS. R
ecent tax reduction by Government to 25.2% and
increase in revenue from service charge for online ticketing will improve
profitability substantially going forward. There is also significant opportunity
for
the Company to ramp up the catering business
given a very large captive
audience which is currently being underserved.
Increasing business volumes
from catering and Packaged drinking water businesses,
along with service charge
for online ticket booking will
drive earnings growth for the company between
FY19-21. We would therefore recommend to Subscribe to the issue.
Key Financials
Y/E March (
`
cr)
FY17
FY18
FY19
Net Sales
1,535.4
1,470.5
1,867.9
% chg
-
4.2
27.0
Net Profit
229.1
220.6
272.6
% chg
-
3.7
23.5
EBITDA (%)
20.4
18.6
19.9
EPS (Rs)
14.3
13.8
17.0
P/E (x)
22.3
23.2
18.8
P/BV (x)
6.5
5.4
4.9
RoE (%)
29
.1
23.1
26.1
RoCE (%)
3
6.8
26.1
32.9
EV/EBITDA 13.7
15.7
10.7
EV/Sales
2.8
2.9
2.1
Company Source: RHP, Angel Research; Note: Valuation ratios based at upper price band.
SUBSCRIBE
Issue Open: September 30, 2019
Issue Close: October 03, 2019
Discount:
`
10 to Retail
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 87%
Others 13%
Post Issue Shareholding Pattern
Post Eq. Paid up Capital:
`160
cr
Issue size (amt): *
`635
-**
`
645 cr
Price Band:
`315-320
Lot Size: 40 shares and in multiple
thereafter
Post-issue implied mkt. cap: *
`5040
cr -
**
`5120
cr
Promoters holding Pre-Issue: 100%
Promoters holding Post-Issue: 87.4%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue: NIL
Face Value:
`10
Present Eq. Paid up Capital:
`160
cr
Offer for Sale: **2.016 cr Shares
Keshav Lahoti
+022 39357600, Extn: 6363
keshav.lahoti@angelbroking.com
IRCTC
IPO Note |
Railways
September 27
, 2019
IRCTC | IPO Note
September 27, 2019
2
Company background
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 was
conferred the status of Mini – ratna (Category-I Public Sector Enterprise) by the
Government of India, on May 1, 2008. Company 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 the company’s
objective to build a “one stop solution” for customers.
Exhibit 1: Segment Result (` in Cr)
P
articular
(FY19)
Revenue % of revenue
Segment
results
% of segment
result
Catering 1044.5 55
119
31.9
Internet Ticketing 234.5
12.3
156.6
42
Tourism 253.1
13.3
22.7
6.2
State Teertha 190.8
10.1
45.3
12.1
Rail neer (drinking water) 176.2 9.3
29.3
7.8
Total 1899.1 100
372.9
100
Source: Company, Angel Research
Internet Ticketing: As of August 31, 2019, more than 1.40 million passengers
travelled on Indian Railways on a daily basis, which consisted of approximately
72.6% of Indian Railways tickets booked online. As a result, there are more than
0.84 million tickets booked through www.irctc.co.in and “Rail Connect” on a
daily basis. Due to service charge on train booking from September 01, 2019
IRCTC is expected to clock in more than `400 revenue on full year basis. However
due to implementation of service charge, IRCTC won’t be compensated from
Government. IRCTC received compensation of `80cr and `88cr from Government
in FY18 & FY19 respectively.
Catering: Company provides food catering services to Indian Railway passengers
on trains and at stations. Company provides catering services for approximately
350 pre-paid and post-paid trains and 530 static units. Company provide catering
services through mobile catering units, base kitchens, cell kitchens, refreshment
rooms, food plazas, food courts, train side vending, and Jan Ahaars.
Travel and Tourism: Company has footprints in across all major tourism segments
such as hotel bookings, land, cruise, air tour packages, air ticket bookings and
specialization in rail tourism.
Packaged Drinking Water (Rail Neer): IRCTC operates ten Rail Neer Plants with 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 their presence in the packaged
drinking water market at railway stations, and to meet the growing demand,
Company is commissioning six new Rail Neer plants. Further four new Rail Neer
plants have been approved by the Company’s Board of Directors and will be
commissioned by 2021.
IRCTC | IPO Note
September 27, 2019
3
Issue Details
IRCTC is selling 2.016cr equity shares through offer for sale in the price band of
`315-320. Retail & eligible employees are also eligible for `10 discount.
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 is an officer of Indian Railway Accounts Service and
presently holding Director (Finance) of the Company in addition to his present
position of executive director – finance (Public Private Partnership), Railway Board.
Exhibit 2: Pre & Post IPO Shareholding pattern
No of shares (Pre-issue)
%
(Post-issue)
%
Promoter 160,000,000 100 139,840,000 87.4
%
Public 0 0 20,160,000 12.6
%
160,000,000 100 160,000,000 100
Source: RHP, Angel Research. Note: Calculated on upper price band.
Objects of the offer
The purpose of the offer is to carry out the disinvestment and to achieve
the benefits of listing the Equity Shares on the Stock Exchanges. Company will not
receive any proceeds from the Offer and all proceeds shall go to the Selling
Shareholder.
Key Management Personnel:
Mahendra Pratap Mall, aged 58 years is the chairman & Managing Director of the
Company. He has experience of over four decades in the agriculture business. 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 was awarded “most
influential CFOs of India” by Chartered Institute of Management Accounts on
July, 2015.
Rajni Hasija, aged 56 years, is the Whole-time Director (Tourism & Marketing) of
the Company since May 18, 2018. She holds a bachelor’s and master’s degree in
Science from University of Delhi. She was an officer of Indian Railway Traffic
Service and has 30 years of experience in commercial and operation of railways.
IRCTC | IPO Note
September 27, 2019
4
Consolidated Balance Sheet
Y/E March (` cr) FY17
FY18
FY19
SOURCES OF FUNDS
Equity Share Capital 40.0
40.0
160.0
Reserves& Surplus 746.6
914.5 882.8
Shareholders Funds 786.6
954.5
1,042.8
Other liabilities 14.2
31.2
20.5
Provisions 78.0
58.5
46.2
Total Liabilities 878.7
1,044.2 1,109.5
APPLICATION OF FUNDS
Net Block 170.4
162.2 154.6
Capital Work-in-Progress 16.8
7.7
40.4
Investment property -
27.6
27.7
Current Assets 1,566.7
2,060.2
2,258.7
Inventories 6.6
7.4
7.9
Sundry Debtors 289.4
550.9 581.7
Cash & Bank 853.0
833.9
1,140.0
Loans & Advances 9.6
9.0
8.4
Other Assets 408.2
659.0 520.7
Current liabilities 947.7
1,274.9
1,474.2
Net Current Assets 619.0
785.3 784.5
Other Non Current Asset 72.5
61.4
102.4
Total Assets 878.7
1044.2
1109.5
Source: Company, Angel Research
IRCTC | IPO Note
September 27, 2019
5
Consolidated Income Statement
Y/E March (` cr)
FY17
FY18
FY19
Total operating income
1,535.4
1,470.5
1,867.9
% chg -
4.2
27.0
Total Expenditure
1,222.8
1,197.3
1,495.7
Direct Expense
958.7
875.3
1,133.5
Personnel
163.8
192.2
195.1
Others Expenses
100.3
129.8
167.2
EBITDA
312.6
273.1
372.2
% chg -
12.6
36.3
(% of Net Sales)
20.4
18.6
19.9
Depreciation& Amortisation
22.4
23.7
28.6
EBIT
290.1
249.5
343.5
% chg -
14.0
37.7
(% of Net Sales)
18.9
17.0
18.4
Interest & other Charges
2.5
2.9
2.3
Other Income
67.5
99.1
88.8
(% of Sales)
4.4
6.7
4.8
Recurring PBT
355.1
345.7
430.0
% chg -
2.7
24.4
Tax
126.0
125.0
157.4
PAT (reported)
229.1
220.6
272.6
% chg -
3.7
23.5
(% of Net Sales)
14.9
15.0
14.6
Basic & Fully Diluted EPS (Rs)
14.3
13.8
17.0
% chg -
3.7
23.6
Source: Company, Angel Research
IRCTC | IPO Note
September 27, 2019
6
Consolidated Cash Flow Statement
Y/E March (` cr)
FY17
FY18
FY19
Profit before tax
355.1
345.6
430.0
Depreciation
22.4
23.7
28.6
Change in Working Capital
142.3
(176.9)
259.9
Interest
(44.4)
(3.9) (57.3)
Direct taxes paid
(138.1)
(125.9)
(162.8)
Others
0.9
(38.9) (5.8)
Cash Flow from Operations
338.2
23.6
492.7
(Inc.)/ Dec. in Fixed Assets
(32.0)
(34.3) (53.9)
Dividend
-
3.9
6.4
Interest Income
64.8
44.5
40.5
Changes in Bank Balance
60.8
26.1
(339.3)
Cash Flow from Investing
93.6
40.2
(346.4)
Dividend Paid (including DDT)
(135.9)
(56.8)
(179.4)
Cash Flow from Financing
(135.9)
(56.8)
(179.4)
Inc./(Dec.) in Cash
295.9
7.0
(33.1)
Opening Cash balances
190.3
486.1
493.2
Closing Cash balances
486.1
493.2
460.1
Source: Company, Angel Research
IRCTC | IPO Note
September 27, 2019
7
Key Ratios
Y/E March
FY17
FY18
FY19
Valuation Ratio (x)
P/E (on FDEPS)
22.3
23.2
18.8
P/CEPS
19.7
20.2
18.9
P/BV
6.5
5.4
4.9
EV/Sales
2.8
2.9
2.1
EV/EBITDA
13.7
15.7
10.7
EV / Total Assets
2.3
1.8
1.5
Per Share Data (Rs)
EPS (Basic)
14.3
13.8
17.0
EPS (fully diluted)
14.3
13.8
17.0
Cash EPS
16.2
15.8
16.9
Book Value
49.2
59.7
65.2
Returns (%)
ROCE
36.9
26.1
32.9
Angel ROIC (Pre tax)
40.6
28.8
37.1
ROE
29.1
23.1
26.1
Turnover ratios (x)
Fixed Asset Turnover
9.0
9.1
12.1
Inventory / Sales (days)
35.8
42.1
35.3
Receivables (days)
68.8
136.8 113.7
Payables (days)
32.7
37.4
37.5
Working capital cycle (ex-cash) (days)
71.9
141.4 111.5
Source: Company, Angel Research
IRCTC | IPO Note
September 27, 2019
8
Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com Website: www.angelbroking.com
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securities of the company covered by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
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make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
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Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
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Research Team Tel: 022
-
39357800
E
-
mail: research@angelbroking.
com Website:
www.angelbroking.com
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Investment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
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