Energetic Rally in the IRCTC Stock

When we talk of ecommerce value creators, the first names that come to our mind are Flipkart, Byju’s, Zomato and Paytm. There was been one listed ecommerce ticketing player doing phenomenally well since its listing in Aug-19. IRCTC came out with its IPO at Rs.320 and got listed in mid-August 2019. Over the last 2 years, the stock price has grown 10-fold from Rs.320 to Rs.3,295, an incredible 221% CAGR.

In the last 10 months since November 2020, IRCTC has grown 2.55 times from Rs.1,290 to Rs.3,295. What triggered such a sharp bounce at a time when Sensex gave around 30% returns? There are 3 factors that can explain this rally since the lows of November 2020.

1)    The rapid opening up of economic activity, post COVID 2.0, is likely to be a big boost. It is expected that by December the vaccination process should be done and rail activity should resume in totality. That is a big boost to IRCTC.

2)    The National Monetization Plan worth Rs.600,000 crore will entail intense private participation in highways and railways. IRCTC will not be constricted by the monopoly of the Indian Railways as private trains will give a big boost to IRCTC.

3)    Lastly, there is a huge investment planned in rail infrastructure and that would mean greater efficiency in the railway network and deeper business prospects for IRCTC. All these factors helped the IRCTC stock in the last 10 months.

Don’t forget the Zomato effect

Most people may not have noticed this, but just look at the performance of IRCTC since the day of Zomato listing on 23rd July. IRCTC is up 42% since the day of Zomato listing. What is the link? It shows that IRCTC with its incredible digital reach may actually be a very cheap franchise on the digital edge that it holds. That could unfold in the coming months.