Saturday, August 13, 2022

Now what is going to happen to IRCTC shares? Should you buy or sell?

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New Delhi: Is the dream run IRCTC shares saw in the past couple of months going to be over? Will IRCTC shares go beyond the Rs 1000 mark? Should we buy IRCTC shares after the split? Should we hold or sell IRCTC shares? These are the kind of questions that we have received from thousands of retail investors or maybe enthusiast readers in the past few days. Well, to begin with, IRCTC has much recovered from its sharpest intra-day fall since the listing of the share in 2019. It had plunged as much as 30 percent in early trade on Friday but recovered following reversal of the order by the ministry of railways which required IRCTC to share 50 percent of its revenue earned from convenience fees.

IRCTC's Black Friday

In a jiffy, because of one decision that could have earned the government an additional Rs 150-200 crore from IRCTC's convenience fee, it lost a market cap of Rs 18,000 crore. More than that, it pushed thousands of retail investors into further confusion and insecurity of selling or holding on to their investment. By the end of the day, however, the IRCTC market cap was Rs 67,652 crore, down from Rs 73,100 crore on Thursday's close.

What is a convenience fee?

The convenience fee is the additional charge that IRCTC charges customers when they book a railway ticket. The ticket amount goes to the railways and the convenience fee is all that IRCTC gets from ticket booking. IRCTC had collected around Rs 300 crore as a 'convenience fee' in the financial year 2020-21. The railway PSU charges a convenience fee of Rs 15 plus goods and services tax (GST) on a ticket for non-AC classes and Rs 30 plus GST for AC classes (including first-class). However, it is discounted for BHIM/UPI users.

Should you still buy IRCTC shares?

Now should you buy IRCTC shares more? Many analysts suggest that it is very usual to see a share price going down after a split. In IRCTC's case though, the reason was out of the blue and unusual. At the same time, a share that was recently trading above Rs 6000 apiece, is now available at a much cheaper price. This price point attracts retail investors. If they would buy more, naturally the prices will go up which means more green for you if you buy this share now.

However, speaking to ET VK Vijayakumar, chief investment strategist at Geojit Financial Services said "Govt asking IRCTC to share 50 percent revenue of convenience fee with the railway ministry is yet another instance which should warn investors of undue optimism while investing in PSU stocks". He said that "Enhancing shareholder return is not the objective of PSUs. Investors have to be careful while chasing PSU stocks, even if they are cheap".

At the time when the government is trying to milk every opportunity it sees with the PSUs, will it let investors make any profit out of it? That's the question which the investors should keep in mind before they get overly optimistic about IRCTC shares.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)

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