Domestic MFs stay lukewarm to IRCTC shr, selling unabated since Sep-end
28 March 2022
After a sharp fall in institutional holdings in Indian Railway Catering and Tourism Corporation Ltd in the quarter ended December last two months the stock has been further selling by domestic mutual funds, according to the monthly scheme portfolio data for January and February.
The travel and tourism industry saw recovery green shoots in Jul-Sep quarter and first two months of the December quarter following the easing of Covid-related curbs. IRCTC was expected to a major beneficiary, but the selling by domestic funds indicate that there isn't a definite consensus around the recovery signs.
Mutual funds' stake in IRCTC had fallen sharply to 0.5% across 19 fund houses at the end of December compared to 4.8% stake held by 25 fund houses at the end of September. This has further fallen to 0.3% at the end of February across 18 fund houses.
Foreign portfolio investor data is not available on a monthly basis, but the FPI stake in IRCTC had declined to 7.1% on Dec 31 from 7.8% on Sep 30. On the other hand, the collective stake of insurance companies had gone up to 4% from 3.6%.
Even as institutional investors have turned negative on IRCTC, the retail investors have maintained their expectations from the stock. The company's shares held by retail investors went up by over 500 bps to 19.4% from 14.3%.
In the quarter ended December, IRCTC's total revenues had risen 33% sequentially to 5.4 bln rupees, mainly on account of a 47% rise in catering revenues to 1.1 bln rupees, a 2.7 times jump in tourism revenues to 727 mln rupees and a 18% increase in its biggest revenue segment of internet ticketing to 3.1 bln rupees.
IRCTC's earnings before interest, tax, depreciation and amortisation went up to 3 bln rupees in Oct-Dec from 2.3 bln rupees with the EBITDA margin declining to 53.1% from 54.1%, according to data from Informist Corporate Fundamental Database.
Even as revenues from tourism jumped to an all-time high, the segment saw an operating loss of 79 mln rupees. In IRCTC management's view, the segment profit would need a couple of quarters to bounce back to original levels.
Internet ticketing segment profit was strong at 2.7 bln rupees in Oct-Dec, up 20% on quarter, and the operating margin went up sequentially to 84.8% from 83.1%.
According to analysts, institutional investors' did not appreciate the government announcement, and its later retraction, of the government asking for 50% revenue sharing of internet ticket convenience fee from IRCTC.
Further, the reopening of domestic flight routes meant that people had the option of air travel, which was expected to affect train travel.
Going forward, IRCTC is expected to report robust growth in revenues but its operating margin will likely taper, said brokerage IDBI Capital in a report last month. The current robust margin was mainly due to higher contribution of internet ticketing, but rising contribution from tourism and catering will dent margins in long term, it said.
The recent trend in IRCTC share price movement has vindicated the domestic mutual funds who sold off or reduced their holdings in the company from October onwards. Shares of IRCTC are currently traded at 770-rupee levels, nearly the same as the 760-rupee levels seen at the end of September.