With an IPO around the corner, you can book a stake in IRCTC

You can soon own a piece of IRCTC, the tourism and catering arm of the Railways better known for issuing train tickets online.

IRCTC, the ₹1,900-crore tourism and catering wing of Indian Railways, will soon raise funds from the market through an initial public offering (IPO) on September 30.

The IRCTC portal, which has front-ended many technology firsts - from online train ticket booking, to providing online booking of catering services, waiting rooms of railway stations to booking air tickets – has been compared favourably with e-commerce biggies for the sheer number of people who use it online.

The company, which forayed into fintech with its own wallet and payment gateway, iPay, will now experiment with running a regular passenger train of the Indian Railways, Tejas Express, between Lucknow and Delhi.

Till two years ago, the public sector unit got its biggest chunk of revenue from issuing online train tickets ; now catering accounts for the bulk of that. This trend reversal happened during the past two years, when just after demonetisation, the government reined in IRCTC from charging commission for selling e-tickets.

That’s a measure of the extent to which government policies can impact IRCTC’s business. In fact, IRCTC declares in its draft red herring prospectus (DRHP) that it is the only entity authorised to provide rail e-booking facility; online travel agencies (OTAs) have to route their rail e-booking transactions through IRCTC’s booking engine.

It also said it is the sole provider of online railway ticketing, catering services, and packaged drinking water for trains and stations. So, if the Government were to allow open competition in any or all of these areas, it may impact its finances, the DRHP notes.

IRCTC’s huge database of railway consumers, which allows it to cross-sell products, had invited comparisons of its e-commerce potential with the likes of Amazon and Flipkart. Amazon had earlier paid some ₹2 crore to IRCTC, just to have a link on IRCTC’s website that routed visitors to Amazon’s website for two years. This opportunity means IRCTC will also have to keep in mind data privacy concerns being raised across quarters in the present day and age.

Without naming Google, IRCTC has said that its business could be negatively impacted by changes in search engines’ search logic, policy and function, as it offers most of its products and services online. Search engines update their search logic from time to time, which determines the placement of different websites, it noted.

Based on the services that IRCTC provides - catering, online tickets, tourism and drinking water - Crisil has compared the railway subsidiary with online ticket players like MakeMyTrip, Cox and Thomas Cook (India), and Bisleri International (Pvt Ltd).

The IRFCTC’s DHRP further notes that it is millennials who are driving the company’s e-catering business, an area where it faces competition from unorganised players.

Packaged drinking water is another area where IRCTC expects scope for growth. Despite being the “only entity authorised by the Ministry of Railways to manufacture and distribute packaged drinking water at all railway stations and trains, subject to availability of Rail Neer”, IRCTC is only able to meet less than half of the current demand for packaged drinking water at railway premises and in trains.

In fact, to increase its revenue, stickers on RailNeer-branded water bottles carried photos of boxing champion Mary Kom, sponsored by BSNL. Among IRCTC’s competitors in this space are other bottled water brands, several of which rode on low costs as not all of the businesses were “above board”.

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