IRCTC Case Study: Business Model, Financials, and SWOT Analysis

Are you interested in identifying monopolies? In today’s blog, we’ll explore a company that roams unrivalled in the market, IRCTC.

What makes this firm unique, and whether investing in a PSU company is worthwhile? So read on to get all the answers and put an end to any confusion you may have. 

Overview

Established under the Ministry of Railways, IRCTC stands for Indian Railway Catering and Tourism Corporation of India. It is a public sector organization. 

IRCTC, the company’s online ticketing gateway, was launched in 2002 and allows customers to purchase tickets online. Subsequently, they began providing catering services and managed food and beverage services on trains and at railway stations, broadening their capabilities beyond online ticketing. As a result of technology advancements and a rise in smartphone usage, IRCTC has released a mobile application that serves as an easy-to-use platform for users to book tickets, check train schedules, and access other services. 

Since investors view IRCTC as the most coveted PSU stock, the company decided to list on Indian stock exchanges in 2019. The government’s share of the business was reduced to 87% following the IPO. 

Did you know?

The Indian government designated IRCTC as a “Mini Ratna” public corporation in May 2008. 

Business Model

Let’s dive deeper into each of its business segments.

1.  Catering & Hospitality – Railway stations, passenger trains, and station premises are among the several areas where food and hospitality operations are dispersed. They provide e-catering, static catering, and mobile catering services.  

2.  Internet ticketing – They empower regular people with technology through their online ticket booking system. Indian Railways has permitted just one company to provide online ticket booking services. 

3.  Packaged Drinking Water – To meet the needs of travellers, they introduced Rail Neer as a reliable and safe packaged drinking water. 

4.  Travel & Tourism – India is thought to have some of the best landscapes on earth, and IRCTC is always trying to promote travel by providing trip packages. 

Revenue Contribution

Of the four main IRCTC business areas, online ticketing makes up approximately 63% of overall revenue, followed by catering services at roughly 22%, rail network, travel and tourism, and rail at roughly 8% and 7%, respectively. 

Market Details

Current Market Price	INR 909
Book Value	INR 33
52 Week High	INR 1049
52 Week High Date	20-Jan-24
52 Week Low	INR 557
52 Week Low Date	29-March-23
Face Value of Share	INR 2
PE Ratio	65.26
Market Capitalization	72175 Crores

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Financial Highlights

Balance Sheet

Particulars	31st March 2023	31st March 2022	31st March 2021
Non-Current Asset	736.1103	506.1311	446.3389
Current Asset	4352.6485	3331.04	2724.94
Total Asset	5088.7588	3884.0923	3153.1789
Equity	2478.4041	1870.3136	1455.8114
Long Term Liability	218.9893	215.8769	159.1085
Current Liability	2391.3654	1784.6307	153.8259

The graph presented above shows that the company’s total assets have grown from 3884.04 crore in FY 2022 to 5088.75 crore in FY 2023, while its long-term liabilities have remained unchanged. Additionally, the company’s current assets have increased exponentially from 3331 crores in FY 2022 to 4352 crores in FY 2023. 

Income Statement

Particulars	31st March 2023	31st March 2022	31st March 2021
Revenue from operations	3541.4729	1878.5744	776.6577
Total Income	3661.9034	1954.4782	861.6415
Total Expenses	2335.0938	1065.0970	643.5259
Profit before tax	1354.0096	885.3767	257.5137
Profit after tax	1005.8811	659.5529	187.0264

According to the company’s income statement, its annual revenue has grown by almost 88%. Consequently, its expenses have also doubled for FY 2023 compared to FY 2022.  

Cash Flow Statement

Particulars	31st March 2023	31st March 2022	31st March 2021
Net Cash flow from operating activities	810.1224	523.9714	247.5385
Cash flow from investing activities	(315.1356)	(242.3862)	(452.8751)
Cash flow from financing activities	(434.3454)	(258.4055)	(46.8471)

The table above illustrates that the company’s cash flow from financing and investing activities has consistently been negative for the last three years, while its cash flow from operating activities has increased year over year.

KPIs

Particulars	31st March 2023	31st March 2022	31st March 2021
Operating Profit Margin (%)	37.91	48.12	29.32
Net Profit Margin (%)	28.40	35.31	24.25
Return on Capital Employed (%)	49.78	44.07	14.10
Inventory Turnover	8.63	5.55	119.73
Current Ratio	1.82	1.87	1.77
Return on Net Worth (%)	40.58	35.22	12.94

According to the KPI for the business, the company’s operating profit margin and net profit margin are inconsistent. However, the current ratio, which indicates the company’s liquidity, has improved compared to FY 2022, and the return on capital employed has increased over the previous three years. 

SWOT Analysis

Strengths

1.  When it comes to offering Indian Railways online ticketing services via their website and mobile application, IRCTC essentially has a monopoly. 

2.  The organization offers a wide range of products, including travel, catering, other services, and tickets.

3.  Among train passengers, IRCTC is considered a trusted brand.

4.  Since it is an Indian government subsidiary, it offers them a stable working environment.

Weaknesses

1.  IRCTC frequently receives complaints from patrons over the food they provide and the restricted selection of options on their menu. 

2.  IRCTC’s responsive system and agility are hampered by inefficiencies in its system.

3.  They do not adequately promote their trip package-related marketing initiatives.

Opportunities

1.  IRCTC can expand the range of services it offers, including digital payments, lodging, and travel insurance. 

2.  By providing appealing international travel packages, the organization can make a name for itself in the global market.

3.  Providing consumers with local and regional delicacies can help them become more satisfied customers.

4.  They can provide ready-to-eat meals and a corporate canteen through their catering service.

Threats

1.  The company may lose its monopoly and market share if it privatises the Indian railways. 

2.  As we have seen, the tour and travel business has experienced significant setbacks in 2020 due to COVID-19. If further incidents of this nature occur, their profitability will inevitably decline.

3.  Any changes to laws or policies about the food safety sector will immediately affect the company’s earnings.

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Conclusion

The Ministry of Railways allowed IRCTC a monopoly to sell tickets online, which has helped to fuel its expansion. The business’s income and earnings have consistently increased. IRCTC constantly seeks to innovate to improve the customer experience while diversifying its business. 

There is no turning back for this mini-ratna company to become one of India’s prosperous enterprises as long as the government maintains its beneficial policies. If you are looking to invest in this company, then you should check your risk profile before making any decision.

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Frequently Asked Questions (FAQs)

Q1. Is IRCTC a government company?
Ans. Yes, IRCTC was established in the year 1999 as a public sector company owned by the government of India under the Ministry of Railways.

Q2. Who are the promoters of IRCTC?
Ans. The President of India is the promoter of IRCTC and accounts for about 62.4% of the company’s total equity.

Q3. Is IRCTC a profitable company?
Ans. Yes, IRCTC is a profitable company, and the firm’s profit for FY 2023 was 1005 crores.

Q4. Who is the Managing Director of the IRCTC?
Ans. Mr. Sanjay Kumar Jain is the company’s chairman and managing director.

Q5. How is IRCTC a monopoly company?
Ans. The government of India has provided them with a monopoly over selling online railway tickets, packaged drinking water, and catering services on trains and railway stations across the country.

Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.