IRCTC Outlook: Indian Railway Catering and Tourism Corporation (IRCTC) has decided to share split. The company informed about the decision to split one share into five equity shares while announcing the quarterly results a day earlier on Thursday. After this, the face value of IRCTC shares will come down from Rs 10 to Rs 2 per share. However, this proposal is yet to be approved by the Ministry of Railways and other shareholders. Since its listing on the stock exchange, its price has jumped by 734 percent against the IPO price of Rs 320 and is currently trading at Rs 2668 per share.
Talking about the financial results of IRCTC, it made a net profit of 82 crores, whereas in the same June 2020 quarter a year ago, IRCTC had a net loss of 24 crores. The company’s operations revenue grew by 85 percent and its revenue rose to Rs 243 crore in April-June 2021 as against Rs 131 crore in the June 2020 quarter.
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Stock Split will attract small investors
PSU company IRCTC says that the decision of share split has been taken in accordance with the guidelines issued by DIPAM (Department of Investment and Public Asset Management) on Capital Restructuring of Central Public Sector Enterprises. Apart from this, IRCTC plans to increase the shareholder base by increasing liquidity in the capital market and also to make the shares affordable for small investors. According to Ashish Chaturmohta, Director (Research), Sanctum Wealth Management, through a stock split, a company increases the number of outstanding shares and existing shareholders get more shares. Its main goal is to make the shares affordable for small investors.
This initiative of IRCTC will make it easier for retail investors to buy its shares, which have a market share of around 45 per cent. According to Vishal Wagh, Head of Research, Bonanza Portfolio, after the split, the number of shares of IRCTC will increase from 250 million to 125 crore and its market share will increase.
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This is the opinion of experts regarding investing in IRCTC shares
- IRCTC has given great returns to investors since its listing in October 2019. Its business is in the monopoly market, due to which it has got special facilities and investors are attracted to this stock. According to Ashish Chaturmohta, in simple words, IRCTC is a platform company that has a monopoly in the passenger train booking business, which has better cash flow. In such a situation, if it declines, then it should be considered as a better investment opportunity.
- On the other hand, according to Wagh, technically speaking, this stock should be completely ignored. Wagh says that if IRCTC does not cross the level of 2750 as soon as possible, then its momentum will stop and if we talk about the downside, then it can fall to the level of 2300. According to Wagh, its shares should be sold before the split.
(Article: Kshitij Bhargava)
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