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Govt to take 50% of convenience fee from IRCTC


MUMBAI: The railways ministry sent a shocker to Dalal Street during Thursday’s post-market hours after IRCTC, one of the most favoured stocks among investors in recent months, said that from November 1, the government will have a 50% share of the convenience fee that the online reservation monopoly charges to its customers. Market players and analysts feel this decision of the government could weigh on the stock in the short term. Currently, IRCTC does not share collections from these charges with the government. However, some analysts pointed out that during its IPO in 2019, the company had pointed out this as one of the risks to the stock. On Thursday, after each IRCTC stock was split into five, from face value of Rs 10 to Rs 2, it closed at Rs 914 on the BSE, up nearly 11% on the day. In a disclosure to the exchanges, IRCTC on Thursday said that the railways ministry on October 28 has “conveyed its decision to share the revenue earned from convenience fee collected by IRCTC in the ratio of 50:50”. As a result, analysts are drastically cutting earnings estimates for IRCTC while traders expect a sharp sell-off in the stock on Friday. In the last one year, as the economy slowly opened after the March-June 2020 lockdown, the stock had gone up more than four times. According to analysts, this government decision could lead to a 27-30% cut in IRCTC’s fiscal 2023 earnings. “This is a huge negative development and we expect sharp correction in the stock price after this announcement,” one analyst said. However, traders pointed out that since the government announced this decision on the day each IRCTC stock was split, investors are yet to get credit for the extra four shares for each share they hold now in their demat accounts. These additional shares will reflect in their demat holdings sometime next week and till then the selling could be limited.


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