Giving a major shock to its shareholders, government-promoted IRCTC announced on Thursday that it will have to share 50 per cent of the revenues earned from convenience fee collected by it with the government. IRCTC is likely to lose 43 per cent of its profits due to the new scheme of arrangement, analysts told BusinessLine .
“This is a negative development and we expect sharp correction in stock price post this announcement,” said a brokerage firm.
The share price of the company has been on a downward spiral since last week as its market-cap touched ₹1-lakh crore. Earlier, market sentiments were hit when IRCTC’s price-to-earnings multiple rose to 340. Analysts say that market regulator SEBI and the exchanges should probe if the government policy was leaked to the stock market players, since the company’s share price had crashed by 22 per cent in a single trading session last week. Analysts are of the view that such a policy cannot be made in a day and it has to be in the works for a few weeks or months.
Readjusted pricing
On Thursday, IRCTC share price was readjusted as the stock was split in the ratio of 1:5. The timing of the letter by the government was poor as liquidity in the counter would rise due to the stock split and the share could be an easy target for short sellers now, analysts said.
The new revenue-sharing arrangement would be enforced from November 1, IRCTC said in its filing on October 28. The company is a monopoly in the Indian railways sector as it provides ticketing, catering and tourism services.
SEBI filing
“ln compliance with the Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, it is to be informed that Ministry of Railways vide above-referred letter has conveyed its decision to share the revenue earned from convenience fee collected by IRCTC in the ratio of 50: 50 w.e.f. 1 November 2021,” IRCTC stated in the filing.
The central public sector enterprise (CPSE), which comes under the Ministry of Railways, is expected to announce its quarterly results on November 1. It had reported a 23 per cent year-on-year decline in net profit at ₹103.8 crore in the June quarter.