Government will decide whether to divest more after one-year lock-in: IRCTC’s Pratap

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Excerpts from an interview with Mahendra Pratap, Chairman and Managing Director, Indian Railway Catering and Tourism Corporation (IRCTC) published in Livemint on 14^th February 2020:

• ₹200 crore run rate in ticketing revenues will continue. Till September the convenience fee was not there on internet ticketing and September onwards they have started levying it on issue of tickets and it works out to almost ₹52 crore per month.
• In Q3FY20 two new plants were commissioned, Bhopal and Jagi Road, and in the next quarter, expect two more plants at Sankrail near Kolkata and Jabalpur being commissioned. There are two more in the pipeline, Una in Himachal Pradesh and Vijayawada in Andhra Pradesh.
• They will perhaps be commissioned in Q1FY21 and then there is a plan for two more plants in Bhubaneswar and Visakhapatnam, which may come up in Q3FY21.
• All these plants will be at different phases of their capacity because when a plant is commissioned, normally in the first year it produces 50-60% which helps in assimilating the production as well as distribution and logistics mechanism.
• In the second year, it runs at 75-80% and only in the third year do they go for full-fledged capacity. So there are plants which will give more production next year, new plants will be commissioned. So this run-up will continue at least for the next two years.
• The first private train was commissioned on 4 October. It ran for almost a quarter. It has given a gross revenue of about ₹15 crore and almost breakeven. The second train was flagged off on 17 January between Ahmedabad and Mumbai and the response in that train has been better than expected.
• The third train is going to start on 16th March. It will be flagged off from Varanasi—between Varanasi and Indore. It is basically a pilgrimage special, connecting three religious places.
• In catering, the tariff was revised in November 2019 which will result in increased license fee and concession fee from the trains as well as an increase in turnover from Rajdhani, Shatabdi, and Duronto trains. They are managing about 350 trains.
• There is competition. In fact a lot of these trains have a transparent bidding process and it is purely on PPP mode.
• They manage two hotels and two Rail Yatri Niwas. That is BNR Hotel at Puri and Ranchi and Rail Yatri Niwas at Delhi and Howrah.
• They are also coming up with a hotel at Lucknow, which is a budget hotel and they plan to set up one budget hotel at Kevadiya near the Statue of Unity.
• They have sufficient cash; they have almost ₹1,000 crore balance with them.
• The 87.4% stake is with the government, 12.6% was divested last year.

Consensus Estimate:

• The closing price of IRCTC was ₹ 1,558 as on 14-February-20. The consensus estimate for EPS of IRCTC is not available. IRCTC reported a net profit of ₹ 12.9 and ₹23.6 per share for the quarter and nine months ended December 31, 2019, respectively. It reported a net profit of ₹ 19 per share for the year ended March 31, 2019.