Why IRCTC can't earn a 'buy'

Indian Railway Catering and Tourism Corp. Ltd's (IRCTC) shares hit a new low for 2024 at ₹777.20 on Monday and are hovering near those levels.

- Manish Joshi

Indian Railway Catering and Tourism Corp. Ltd's (IRCTC) shares hit a new low for 2024 at ₹777.20 on Monday and are hovering near those levels. The stock's lacklustre performance over the past three years is a reminder that companies, even in monopoly businesses like IRCTC in railway ticket booking, do not see a linear rise in profit and market capitalization.

This applies more so if the monopoly business is government-owned, which means there are higher chances that it will not be allowed to make windfall profits and will face challenges in cost-cutting through manpower rationalization.

As IRCTC would find it difficult to raise ticket-booking charges, it has to rely on volume growth and ancillary businesses. While volume growth has its constraints, ancillary businesses have not done enough to please its investors.