September 30-October 3, 2019: One of the prominent public sector companies, Indian Railway Catering and Tourism Corporation (IRCTC), hit the capital market with a ₹645-crore public issue at a price band of ₹315-320;

October 14, 2019: As against the IPO price of ₹320, the stock listed at ₹644, surged to a high of ₹743.80 and closed at ₹728.60, giving nearly 128 per cent for IPO investors on listing day itself;

3 months later: After trading flat on Day 2, it picked up momentum and surged sharply to reach nearly ₹2,000 levels by December 2019. After the astronomical rise, the stock faced some pressure and corrected over 50 per cent to ₹915 level by February 2020

October 2021: The rally that took place from February 2020 was phenomenal, Ignoring naysayers and valuation pundits IRCTC jumped to an astronomical height of ₹6,369 by October 2021. Just two years after listing, the stock gave mindboggling returns of nearly 19 times or 1,890 per cent;

Current status: However, the stock since then corrected and now rules around ₹750 level on an adjusted basis (at a non-adjusted price of ₹3,750 without the 5:1 stock split) still returning over 10 times for investors who had invested in the IPO. Even for those who had invested in the stock at the first peak (pre-Covid), it has almost doubled. Offer-for-sale by the Union Government in December 2021 weaned away some interest from this stock

November: 21-23, 2023: IREDA or Indian Renewable Energy Development Agency Ltd hit the market with ₹2,150 crore at an issue price of ₹30-32

November 29: As against issue price of ₹32, the stock got listed at ₹50 and surged further to close at ₹60, nearly doubling IPO investors’ money. On day 10 of listing, the stock zoomed to a high of ₹123.20 and the next day, (December 15) it fell 10 per cent to ₹108.30.

Comparison

Apart from prefix IR” the other similarity is that both are public sector undertakings. While IREDA was established in 1987, IRCTC was set up in 1999.

When compared with IRCTC’s IPO size of ₹645 crore, IREDA’s is much larger at ₹2,150 crore. While IRCTC was a complete offer-for-sale by the Centre, which means the fund raised went to Government kitty, the IREDA issue had a fresh component worth ₹1,290 crore, apart from an OFS of ₹800 crore. The company will use the IPO funds to augment its capital base.

The public issue of IRCTC was subscribed 111 times with retail portion getting subscribed nearly 15 times. However, IREDA issue was subscribed 38.8 times with retail portion at 7.7 times.

IRCTC’s business verticals (railway ticketing and catering) are not comparable with any listed peers. As the initial pricing trend of IREDA resembles that of IRCTC, there is a ray of hope for investor fraternity that this stock will also gain pace, going forward. They should keep some factors in mind.

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First, as mentioned above, IRCTC enjoys a monopoly in ticketing for Indian Railways and to that extent it will command some premium, whereas IREDA has competition in the form of Power Finance Corporation, REC and PTC India Financial Services. Besides, the business of IREDA, which is into financing, is cyclical in nature. 

When the IRCTC public issue was launched, the secondary market was at the start of a bull rally that took Sensex, NIfty, MidCap and SmallCap to historical peaks. However, we are already at a life-time high and no one knows how long the current rally will sustain, given the stiff valuations. So, if a correction unfolds sooner than expected, shares of IREDA may come under pressure.

Another worry could be dilution of the Centre’s stake through offer-for-sale, which will impact the stock.

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