IRCTC shares fall nearly 40% from 52-week high; here's what's behind the slump

Shares of Indian Railway Catering and Tourism Corporation (IRCTC) have dropped 38.38% from its 52-week high of ₹1,139 it had touched on May 23, 2024. The stock touched its 52-week low of ₹701.75 on Thursday, February 27. The company has a monopoly in online train ticket booking and railway catering services business. Despite being a monopoly player, the stock has been a marked underperformer in the NIFTY NEXT50 index which has corrected 13.19% during the same period, data from the National Stock Exchange showed.

IRCTC earns its maximum revenue from online ticket booking where it charges its customers a convenience fee from travellers. The convenience fee for travellers booking tickets for air-conditioned (AC) trains is ₹30 when booking via the online banking option and ₹20 if booking through UPI. So, the maximum chunk of revenue IRCTC earns is through AC train booking. However, as per a report by the Press Trust of India, more than 95% of passengers travel in non-AC classes. To increase its revenue, IRCTC is dependent on railways to hike the number of AC trains.

Meanwhile, domestic air travel is growing at a fast pace and with government initiatives like Ude Desh Ka Aam Naagrik (UDAAN) air travel has become affordable and is reaching Tier-II Indian cities. Domestic air passenger traffic rose by 6.12% in 2024 to 161.33 million from 152 million in 2023, data from the Directorate General of Civil Aviation (DGCA) showed.

IRCTC shares gave multi-fold returns to its investors from 2019 to 2021 when its valuations jumped sharply. The stock's price-to-earnings (P/E) ratio jumped from 43 times in 2019 to 320 times in 2021. However, the stock has been witnessing a price correction since 2021 after reports emerged about the government's plan to appoint a regulator for the rail sector. Indian Railways had reportedly asked IRCTC to share 50% of its convenience fee revenue with the railways. The news led to a sharp decline in IRCTC's stock price, with the counter declining almost 40% from its all-time high of ₹6,393 per share touched on October 19, 2021.

In the December 2024 quarter, the company reported a net profit of ₹341 crore, up 14% from ₹300 crore in the same period last year. Its revenue from operations advanced 10% to ₹1,225 crore from ₹1,115 crore in the year-ago period.

In the post-earnings conference call, the management said that strong sequential revenue growth was mainly due to an uptick in tourism and catering businesses. Meanwhile, revenue from the internet ticketing segment declined by 5% sequentially. On the margins front, the overall EBIT margin dipped by 90 basis points (bps) quarter-on-quarter (QoQ) due to a decline in catering margins despite good growth in segmental revenue. However, internet ticketing margins improved by 370 bps QoQ at 84% due to an increase in non-convenience fees despite reaching a saturation point.