What has come as a negative surprise for the investors? IRCTCThe government has asked the online ticketing branch of Indian Railways to share half of their convenience fee from internet booking with it. IRCTC has been asked to share 50% of the revenue earned from bookings on its website with the Railway Ministry as convenience fee, an arrangement that was put on hold since the pandemic.
“Government asking IRCTC to share 50% convenience fee with Ministry of Railways is another example that should warn investors of undue optimism while investing in PSU shares. Increasing shareholder returns is not the aim of PSUs. So investors have to be careful while chasing PSU stocks, even if they are cheap,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
The convenience fee charged from the customers generated a huge revenue for both IRCTC and Railways. The fee is not part of the rail fare. This is for the online ticket booking service offered by IRCTC.
“This decision creates a huge dent in the confidence of investors in PSU entities as it reflects uncertainty in business continuity for such companies. At a time when the government is trying to sell its stake in PSUs, it The news will dampen investor sentiments and sharing of convenience fee has a major impact on the market cap of these companies with respect to additional revenue share,” said Divam Sharma, Co-Founder, Green Portfolio, SEBI registered Portfolio Management Services.
IRCTC share price plunges to 25% lower circuit in early deals on Friday ₹685 each on BSE. Analysts believe that it will be difficult for IRCTC to get past valuations as risk factors will always be on the mind of investors.
“This is a big negative surprise for the investors of IRCTC. This will lead to a crash in IRCTC stock but will also drag the chain of momentum in other PSU stocks,” said Santosh Meena, head of research, Swastika Investmart.
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