New Delhi: Indian train and tourism catering stocks (IRCTC) recovered most of their initial losses.
It was closed 7.45 percent lower at RS 845.65 at BSE and 7.74 percent at Rs 842.8 at NSE.
Stock has fallen as much as 30 percent in early trading on Friday, following orders by the train ministry that requires the IRCTC to share 50 percent of its income obtained from the cost of comfort from November 1.
This is the sharpest day of intra-day falling since the listing in 2019.
The decline in stock prices has wiped as many as RS 21,900 Crore from its market assessment in the initial trade.
However, the shares restored the majority of losses after the government pulled the order.
It sounds confusing? Let’s destroy …
the state-owned IRCTC has a monopoly in ticket services and online catering for Indian trains.
This is the only company authorized to manage food services on the train and have a monopoly in ticket service and online catering for Indian trains.
Income from convenience costs on train tickets is the largest income seeker for IRCTC in 2020-21 because income from catering and comprehensive services fell from RS 512.45 Crore in 2019-20 to RS 87.31 Crore in 20-21 due to restrictions related to Covid.
IRCTC gets Rs 299.13 Crore from convenience costs on 2020-21 and RS 350 Crore in 2019-2020.
Now, the government wants IRCTC to share half of the income of comfort costs with it, which means he wants to get Rs 150 Crore from the train.
When the IRCTC agrees to share 50 percent of the convenience costs on the ticket ordered through its website, investors become very upset.
And it’s a natural reaction because it produces generous profits from these costs.
IRCTC charges the comfort fee of RS 15 Tax Goods and Services (GST) on tickets for non-AC classes and RS 30 plus GST for AC classes (including first class).
For Bhim / UPI payment, the convenience fee is offered at a discount price of Rs 10 plus GST tickets for non-AC classes and RS 20 plus GST for AC classes.
On Thursday night, the IRCTC told the exchange that was “in accordance with the regulation of 30 Securities and Exchange in the LNDIA (List of Liabilities and Disclosure Requirements), 2015, will be informed that the train ministry delivered the letter to share income obtained from the cost of comfort gathered By IRCTC in the ratio of 50: 50 WEF November 1 2021.
“At the close, the Capitalization of the IRCTC market was Rs 67,652 Crore, down from Rs 73,100 Crore at Thursday’s close.
As soon as the stock began to tanking in the morning, the government pulled the order and shares recovered 39 percent when it reached the highest intra-day RS 907.
Does the government not attract the IRCTC’s revenue and income before interests and taxes (EBIT) will each be hit by each each 14 percent and 36 percent.
Also, the government is under fire to surge gasoline and diesel prices, and this step will erode investor confidence in PSU shares.
“The government has asked the IRCTC to share 50 percent comfort costs with the train ministry, another example that must be warned of investors should not be investors while investing in PSU shares.
Increasing the return of shareholders is not the purpose of the PSU.
Shares, even if they are cheap,” Vk Vijayakumar, The head of investment strategist at Geojit Financial Services told The Economic Times.