IRCTC: The Government Changes its Decision to Share the Efficiency Charge; Market Prices Rise by 34%
The value of IRCTC shares plummeted after the Indian Ministry of Railways announced that half of the revenue earned by the firm through the convenience charge on train tickets will go to the Ministry of Railways. On 29/10/2021 at 11:27 AM the stock was trading at Rs 873 per share on the BSE, down 4.5 percent from yesterday’s close of Rs 909 (down 34 percent). According to a note from ICICI Securities, had the change been implemented immediately, revenues and profits before interest and tax (EBIT) would have decreased by 14% and 36%, respectively.
The stock trades in the futures & option (F&O) segment, which has no circuit limits. A total of around 890,000 shares had changed hands on the NSE and BSE in early trades with pending sell orders for 23.74 million shares, the exchanges data showed. The Ministry of Railways via letter dated October 27, 2021 (received on October 28, 2021) has decided to share the revenue generated from the convenience fee collected by IRCTC at a ratio of 50:50 starting November 1, 2021. According to an exchange filing made by IRCTC after market hours on Thursday, the company stated that it had been informed of the decision.
IRCTC’s annual report reveals that it made Rs 299.13 crore from the convenience charge in 2020-21 (also known as service charge). These profits were reduced owing to the epidemic’s decline in railway ticket bookings. IRCTC made revenues of Rs 349.64 billion in 2019-20, according to its annual report. On 29/10/2021, officials informed Business Standard IRCTC’s leadership would meet to strategize about how to preserve income.
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