India's IRCTC cuts losses as railways ministry drops convenience fee sharing plan (updated)

Indian Railway Catering and Tourism

29/10/2021 08:31

(Recasts lede, updates shares, adds analyst quote, background)
    BENGALURU, Oct 29 (Reuters) - Shares of Indian Railway
Catering and Tourism Corp (IRCTC)  INIR.NS  pared most of their
sharp early losses on Friday, as the government reversed its
decision to take 50% share of the state-owned company's revenue
from convenience fees.
    IRCTC plunged as much as 30% in its sharpest intraday fall
since listing in 2019, wiping off as much as 219 billion rupees
($2.93 billion) from its market valuation, after the Ministry of
Railways asked it on Thursday to share 50% of revenue earned
from convenience fees from Nov. 1. 
    But the stock pared most of these losses after the Indian
government withdrew its decision earlier this morning. 
    "Ministry of Railways has decided to withdraw the decision
on IRCTC convenience fee," the secretary of India's Department
of Investment and Public Asset Management said in a tweet https://twitter.com/SecyDIPAM/status/1453958990606393346.
    IRCTC, the only firm authorised by the Indian Railways to
manage food services on trains and offer online railway ticket
booking services, earns a sizeable chunk of its revenues from
convenience fee.
    The company earned about 2.99 billion rupees from
convenience fees in 2020-21 or around 38% its revenue from
operations, according to its annual report, in a year marred by
COVID-19's hit to travel. 
    "This incident reveals the risks that investing in public
sector enterprises carry," said Shriram Subramanian, managing
director at corporate governance advisory firm InGovern Research
Services. 
    "All government ministries should realise not to rock the
applecart as valuations of most PSEs are already very depressed
and the disinvestment programs, like the LIC IPO, could get
impacted." 

($1 = 74.8100 Indian rupees)

 (Reporting by Vishwadha Chander in Bengaluru; Editing by Rashmi
Aich)
 ((Vishwadha.Chander@thomsonreuters.com; Mobile: +91 7506036802;
Twitter: https://twitter.com/vishwadha;))