Recommendation from Miscellaneous Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.
 

IRCTC : ON THE RIGHT TRACKS

HERE IS WHY
✓Bounce-back in travel industry
✓Packaged water doing well
✓Guaranteed rise in earning

The Indian travel and tourism industry has tremendous growth opportunities with increasing travels in the postpandemic scenario. As such, IRCTC has a huge role to play in making the journeys safe and joyful for its customers. IRCTC is the only firm authorised by Indian Railways to provide online ticket buying. Along with this, it also provides catering service and packaged drinking water. It is a central public sector enterprise in which the Government of India owns 67.4 per cent. In 2008, IRCTC was elevated to the status of ‘Mini Ratna’. Internet ticketing, catering, travel and tourism and packaged drinking water are the four business segments of IRCTC.

As of March 31, 2022, the internet ticketing firm had 8.03 crore users and 62.73 lakh daily user logins. The catering industry has seen a 65.57 per cent increase in licensing fees and 6.52 million meals ordered through its services. In terms of passengers travelled, the tourism segment reservations increased to 525,981. The packaged drinking water industry sold 19.86 crore water bottles. Internet ticketing is available via the website and the IRCTC apps. It contributes 54 per cent of the company’s revenue with ₹38,178.32 crore in ticket fee received in FY22. IRCTC books around 11.44 lakh tickets online on an average.

Its catering services include mobile catering which is only available on six trains (pantry cars), static catering which has 306 food plazas and fast food units along with hospitality business which has 10 executive lounges and retiring rooms. It also offers e-catering, which supplied over 21,730 meals as of May 31, 2022. The catering section accounts for 27 per cent of IRCTC’s income. Packed drinking water accounts for around 9 per cent of the company’s sales. IRCTC established ‘Rail Neer’ to provide its clients with clean, bottled drinking water. In the rail travel category, Rail Neer has established itself as a powerful brand

It has 15 state-of-the-art production facilities scattered across India, with five more units set to open in FY23. IRCTC simplifies travel by picking destinations that attract tourists from all around the world. It accounts for around 8 per cent of the company’s overall revenue. In FY22, IRCTC’s income increased 142 per cent year on year to ₹1,879 crore, up from ₹777 crore in FY21. The increase was mostly due to the economy recovering speedily following the pandemic-related blow. Its PAT rose 254.87 per cent year on year to ₹664 crore, up from ₹187 crore in FY21.

The large increase in PAT can be attributed to the fact that over 80 per cent of tickets are bought online with IRCTC receiving a portion as convenience charge. IRCTC is currently focusing on strengthening its technological infrastructure and developing a technological backbone in order to serve more consumers and achieve more successful reservations. Currently, the rate of successful transactions on IRCTC platforms is 32.98 per cent while unsuccessful transactions are 67.02 per cent. The company’s trailing 12-month sales are ₹2,890 crore, a 54 per cent increase on a yearly basis. The ROE and ROCE are 39.9 per cent and 51.30 per cent, respectively, for the latest financial year. Given the predicted substantial rise in earnings and rising margins, as well as the good future outlook, we recommend BUY.