IRCTC Share Price: IRCTC shares fell more than 20 per cent in early trade today and touched the lower circuit. This fall in the shares of IRCTC is a reaction to the government’s directive under which the government has directed the company to share the revenue. There was apprehension among investors that this directive could reduce the earnings of the company by 36 percent. However, today the government withdrew this decision. DIPAM Secretary Tuhin Kanta informed by tweeting that the Ministry of Railways has now stayed the decision to take half of the revenue from the convenience fee from IRCTC. Due to this, IRCTC shares recovered again.
Indian Railways Catering and Tourism Corporation (IRCTC) had informed on Thursday that the government has asked it to share 50 per cent of the revenue received from the facility fee from the Ministry of Railways. This decision will be effective from 1 November 2021. Due to this, its prices fell sharply on Friday. The revenue sharing order came on the same day that IRCTC shares were split in the ratio of 1:5 to increase liquidity and availability for small investors.
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Investment in PSU stocks may be affected
- The main source of revenue and income of IRCTC is convenience fee. Brokerage firm ICICI Securities has written in its note that as per the government order from November 1, IRCTC will pay 50 per cent of the convenience fee to the Ministry of Railways, which can lead to a decline in its revenue by 14 per cent and EBIT by 36 per cent.
- According to VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the government’s directive is considered negative for IRCTC. According to Vijayakumar, after the directive to the government to share half of the revenue received through convenience fee, investors should now be careful about investing in PSU stocks as they have never been aimed at increasing the shareholder’s capital. Vijaykumar has cautioned investors to invest in PSU stocks, even if they are available cheaply.
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- Santosh Meena, Head of Research, Swastik Investmart said that the government’s directive was a negative surprise for the investors of IRCTC. According to Meena, this decision of the government may affect the growth of not only this company but also other PSU stocks. He believes that investor sentiment was getting stronger regarding PSU stocks, but the latest instructions from IRCTC may have a negative impact on it.
- D Muthukrishnan, a Chennai-based wealth planner, tweeted that the government’s new revenue sharing formula will either reduce profits or suffer losses for IRCTC. According to Muthukrishnan, this directive will also reduce the confidence of the investors in the disinvestment efforts of the government.
(Article: Kshitij Bhargava)
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