After an exponential rally of almost 1900 percent in just the first 2 years after listing, shares of railway stock IRCTC have shed 30 percent of investor wealth.
Listed in October 2019, IRCTC witnessed one of the best debuts in the Indian markets. The stock was listed at ₹644, an over 101 percent premium from its issue price of ₹320.
Post listing, the stock was in high demand on the back of strong fundamentals, robust growth outlook, sectoral prospects, financial performance, etc. In just 2 years after its debut, the stock hit its record high of ₹6,375.45, in October 2021, witnessing a massive 1892 percent return against its issue price.
An investor who invested ₹15,000 during the IPO of IRCTC in October 2019, would have turned the amount into ₹2.98 lakh in just 2 years.
After the rail stock hit its record high, the company, later that same month (October 2021), announced a stock split in the ratio of 1:5. Since then, the stock has moved on a downward trend, declining 30 percent since October 2021.
Currently trading at around ₹660, the stock is now a little over 14 percent away from its 52-week high of ₹775, hit in November 2022. Meanwhile, it has risen 19 percent from its 52-week low of ₹557, hit in March 2023.
The stock has been flat, down a little over half a percent in the last one year, but has gained 3.5 percent in 2023 YTD.
In a recent note, post the company's June quarter results, brokerage house B&K Securities maintained its 'sell' call with a target price of ₹472, indicating a downside of almost 30 percent.
"IRCTC remains a robust business model. It is also a monopoly. Nonetheless, given its obligation to prioritise the broader public interest, the company faces challenges in fully embracing its monopoly position. This duality presents both pros and cons for the company. The controlled monopoly aspect protects the company from disruption, but also doesn’t let it benefit from the same. It entails a responsibility to consider the social impact, and act accordingly. We are thus circumspect to ascribe rich valuations to such a model. This is because entities other than the management have disproportionate say in the outcome of IRCTC. The nature of exceptional items reported this quarter is a testament to this. We continue to believe that IRCTC’s pricing power is restrained. Our DCF implied target price is ₹472 (unchanged). However, there remains risks on the downside given we have assumed pricing improvements in FY25E, the failure of which will cause further downside," it explained.
In the June quarter, IRCTC reported a standalone net profit of ₹232 crore, down 5 percent from ₹245 crore posted in the previous year period. Revenue from operations during the quarter, however, jumped 17 percent year-on-year (YoY) to ₹1,002 crore versus ₹853 crore in the same quarter last year.