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IRCTC Disappointed with Biding Only Rs. 72,000 Cr

The Indian Railway Catering and Tourism Corporation (IRCTC), which was closed on Thursday, saw huge demand for its shares in the initial public offering (IPO). At the end of the bidding process on Thursday, IRCTC’s IPO to raised Rs. 645 crore was subscribed nearly 112 times, data compiled by the national stock exchange showed.

Investors bid for the company’s more than 225 crore shares, compared to the offer’s 2.02 crore shares, according to National Stock Exchange information, Thursday at 6:00 p.m. In the upper price band, according to the NSE data, IRCTC received bids worth Rs. 72,000 crore.

The railway ministry authorizes IRCTC to sell Indian railway tickets online, to provide catering services and to produce and supply packaged drinking water at railway stations and on trains across India.

IRCTC operates in four business segments as well as providing passengers with e-catering services through its mobile app.

“IRCTC could see better valuation and a jump in EPS from second half of FY20 due to restoration of service charges which were halted after demonetization and the recently announced corporate tax rate-cut,” Deepak Jasani, head of retail research at HDFC Securities told Reuters.

“It is also partly in the internet space and such companies are witnessing heightened investor interest.”

The IPO is part of the government’s divestment process to help achieve its goal of raising Rs. 80,000 this fiscal year. Sources told Reuters in January that the government plans to meet this goal through the selling of state-owned property.

After the IPO, the government will retain an 87.4% interest in the IRCTC.

Earlier this year, the government-run Rail Vikas Nigam Ltd and MSTC Ltd did not receive as much coverage as IRCTC, but were fully subscribed at the end of the subscription period.

The problem for IRCTC, which also manages Indian railway holiday packages and pilgrimage tours, involves an offer to sell 2,02 crore shares in a Rs. 315-320 price band per share.

IRCTC will not obtain any revenue from the bid and, according to the red herring prospectus, all proceeds will go to the state.

The overwhelming response comes in the midst of slowing growth in Asia’s third-largest economy, which has hit all-round sales from cars to cookies prompting the government to step in with deep corporate tax cuts and a host of other steps to revive growth.

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