The IRCTC Incident

From Being An Apple To The Eyes To A Stock That Gave Shock, Here Is What Happened To One Of The Buzz Creating Stock IRCTC

IRCTC (i.e. Indian Railway Catering and Tourism Corporation) was in the news all over because of various events that hit the sentiments of the investors which had a significant impact share on the price of the company. The company crossed market capitalization of Rs. 1 trillion earlier.

The state-owned IRCTC is a company that has a monopoly in the Indian railway's sector as it provides ticketing, catering and tourism services.

About Convenience Fees:

IRCTC a government-promoted company recently informed the stock exchanges after-market hours on Thursday of the last week of October that the ministry had written for a 50:50 sharing of the revenues earned via convenience fee collected by it with the government w.e.f. November 1 of this year. This in turn implied that the company could lose 43 percent of its profits due to new proposed arrangements. This was a re-attempt on the part of the government for a revenue-sharing proposal which was stopped in the year 2016.

Closed on a good note on Rs. 913.75 on 28th of October, 2021 and hit to Rs. 650.10 in the first hour of the market due to the news, the stock was hammered by 29 percent on the last business day of the month. The intra-day swing in the price resulted in a wipeout up to Rs. 4,500 crore of retail investor wealth and from the company’s market cap, stock market analysts said.

This led to a reversal in the arrangements made by the Ministry of Railways, the withdrawal bought a recovery in the share by 39 percent and hit an intraday high of ₹ 906.

Convenience Fees charged to the customers is a substantial revenue both for the Railways and for IRCTC. This refers to the services exercised online for booking train or air tickets offered by the IRCTC platform. This fee is not part of the fare that passengers pay for the journey; it is for the service of online ticket booking offered by IRCTC.

About Previous Sessions:

On October 28th IRCTC started trading as an ex-stock split. The share split ratio is 1:5 and resulted in a price readjustment. There was a sub-division in the face value of the shares from Rs. 10 per share to Rs. 2 per share. IRCTC shares jumped 20 percent after it started trading ex-stock split.

Previously on Monday i.e. on October 25th of this year, the stock got added to the Ban list by the Stock Exchange. NSE mandated to put any stock where the Market Wide Position Limit (MWPL) crosses 95 percent under a temporary F&O ban till the positions in the contract come below 80 percent. NSE said the derivative contracts in the mentioned securities have crossed 95 percent of the market-wide position limit and have, therefore, been put under the ban. IRCTC tanked over 18 percent during early trade on Wednesday to slip to Rs 4,371.25. The scrip declined 9 percent to settle at Rs 5,363 each on Tuesday.

Thank you.

Regards,

Shradha Patel (Section J),

Kautilya,

IBS Mumbai.