IRCTC

Economic Analysis

 In this Blog, you're going to read about -

• Railway Sector
• About IRCTC
• Management 
• Shareholders Pattern 
• Financial Analysis

Railway Sector

India has the fourth-largest railway system in the world, following the US, Russia and China.

The Railway sector of India is among the world’s largest rail networks, and its route length network is spread over 67,956 km, with 13,169 passenger trains and 8,479 freight trains, plying 23 million travellers and 3 million tonnes (MT) of freight daily from 7,349 stations. India's railway network is recognised as one of the largest railway systems in the world under single management.

• India is projected to account for 40% of the total global share of rail activity by 2050.
• Passenger traffic reached 8.10 billion and is estimated to reach 12 million by 2031.
• There is a four-fold increase in Railway Capex from INR 54,000 crore in 2013-14 to INR 2,15 Lakh crore in 2021-22.
• Railway Sector in India has the highest ever planned Capital Expenditure of $32billion in 2022-23.
• FDI inflow in railway-related components stood at US$1.23 billion from April 2000 to June 2021.
• The Government has allowed 100% FDI in the railway sector.
• Indian Railways is the single largest employer in India & 8th largest in the world- employing close to 1.3 million people. 
• The Indian Railways aims to be the driver of India's Economic Growth.
• Indian Railways has committed to becoming a net-zero carbon emitter before 2030.
• By Dec 2023, the entire rail network will be fully electrified & by 2030, the entire rail network will run on renewable energy.
• Railway stations are upgraded/modernized under the Adarsh Station Scheme based on identified need of providing better-enhanced passenger amenities at stations.
• 1253 railway stations have been identified for development under Adarsh Station Scheme. Out of these, 1211 railway stations have been developed & the remaining 42 stations are targetted for development in FY 2022-23.
• The Expenditure incurred for the modernization of stations during the last three years & previous year (till November 2021) i.e 2018-19,2019-20,2020-21 (till November 2021) is INR 1585.88 crores, INR 1903.11 crores, INR 2582.90 crore & INR 1061.83 respectively.
• To achieve its Green mission, Indian Railways has solarised more than 1000 stations.
• Indian Railways has commissioned wi-fi at 6089 Railway station across the country (120 during the year )
• Broad gauge railways network stands at 64,689 Route km, of which 71% is electrified.

Rising export of railways sector :

• India’s export of railways grew at a CAGR of 52.52% during 2010-2019 to reach US$ 635 million.
• In 2019, Train 18, Indian Railways’ fastest engine-less self-propelled train gained several queries for export.
• On July 28, 2020, Railways handed over 10 Broad Gauge (BG)locomotives to Bangladesh, under grant assistance from the Government of India.
• In January 2021, Hyundai Motor India Ltd has announced that it has exported 125 cars to Nepal via the Indian Railways. The export is claimed to be eco-friendly and the first-ever by the company. With this step, the company is aiming to reduce its carbon footprint by 20,260 tonnes.

FDI Investment in Railway Sector :

Following are Major investments & developments in the Indian Railway Sectors.

• From April 2000 to March 2021, FDI inflows in the railways-related components industry stood at US$ 1.23 billion. 
•  In November 2021, Indian Railways announced that 102 semi-high-speed Vande Bharat Expresses are expected to commence operations by 2024, with at least 10 new trains scheduled to launch by August 2022 that will connect 40 cities.
• In October 2021, Indian Railways announced a plan to establish 500 multi-modal cargo terminals under the ‘PM GatiShakti’ programme, with an estimated outlay of Rs. 50,000 crore (US$ 6.68 billion) in four-five years. Through this plan, the government plans to integrate various modes of transportation for seamless movement of the parcel and bulk cargo (e.g., coal and steel).
• In July 2021, the South Central Railway zone announced infrastructure development by doubling the maximum permissible speed to 100 km per hour on the Godavari Bridge. The initiative gave a major boost to the Indian Railways on infrastructure modernisation.
•  In July 2021, Indian Railways executed remodelling of Gangapur City Yard to boost the speed of railways between the Delhi and Mumbai routes.
•  Since the launch of the first ‘Kisan Rail’ service on August 7, 2020, the Indian Railways have operated a total of 1,040 Kisan Rail services by transporting 3.38 lakh tonnes of consignment across 72 routes in the country until July 30, 2021.
•  In July 2021, the Ministry of Railways received bids from the private and public sectors to operate 29 pairs of trains with about 40 modern rakes, entailing an investment of ~Rs. 7,200 crore (US$ 966.74 million).
•  In May 2021, the Government of India and the European Investment Bank (EIB) signed a finance contract for the second tranche of US$ 182.30 million for the Pune Metro Rail project.

more

About IRCTC

Indian Railway Catering and Tourism Corporation Ltd (IRCTC) is a wholly-owned entity of the Government of India, under the administrative control of the Ministry of Railways.

IRCTC was incorporated on 27th September 1999 as an extended arm of the Indian Railways to upgrade, professionalize and manage the catering and hospitality services at stations, on trains and other locations and to promote domestic and international tourism through the development of budget hotels, special tour packages, information & commercial publicity and global reservation systems.

IRCTC is the only entity authorised by the Indian Railways to sell railway tickets online, provide catering services on trains, and deliver packaged drinking water at railway stations and trains in India. The company operates through four major divisions & core activities of IRCTC- 

• Catering & Hospitality
•  Internet Ticketing
•  Travel & Tourism
•  Packaged Drinking Water (Rail Neer)

offering a comprehensive range of products and services that meet the needs and expectations of millions.

Vision :

"To be the leading provider of high-quality travel, tourism and hospitality-related services, for a range of customer segments, with a consistently high level of customer satisfaction".

Mission :

"Our mission is to enhance customer services through railway catering, hospitality, travel & tourism with the best industry practices and aims to cement itself as a leader by providing value-added products and services for passengers, tourists and other customers, targeting IR and Non-IR related Services alike and building a robust business portfolio that is scalable and based on core competence".

Catering & Hospitality :

IRCTC is one of the largest hospitality and catering companies in the country with a vast gamut of businesses in hospitality and catering spread over passenger trains, railway stations, station premises and other ancillary business activities.

  E-Catering is the latest addition to the catering and hospitality business of IRCTC through which the company has been able to amalgamate technology with food.

• 29% contribution to total operating revenue.
• 9180 Meals per day.
• 200 plus stations providing e-catering service.

E-Catering Per Day Meals Trend:

The trend of E-Catering has rapidly increased from 2017-to 2020, FY2020-21 due to Covid Pandemic
the orders have been decreased drastically.

* E-Catering operations remain suspended up to 31.01.2021 due to pandemics.

Internet Ticketing :

IRCTC pioneered internet-based rail ticket booking through its website accounting for 79.63% of the total reserved tickets booked online on Indian Railways in 2020-21. On average, 4.80 lakh tickets were sold daily through IRCTC's website and Mobile App during 2020-21.

The IRCTC e-Ticketing System was migrated to the Next Generation E-Ticketing System (N-GeT) on 28-Apr-2014 to enhance the capacity of e-ticket booking. The capacity was enhanced from 2000 to 7200 tickets per minute.

• 57% Contribution to total operating revenue.
• 808 lakhs tickets booked through mobile App (46% online tickets).
• 361 lakhs tickets booked through the website (21% of online tickets).

Passengers are rapidly shifting from PRS Counter to Internet Ticketing. 

At present,  The next generation e-ticketing (NGeT) system can book more than 26,000 tickets per minute with a record booking of 26,458 tickets in a minute. 

The trend of E-Ticketing Revenue :

• Launch of IRCTC – SBI Cobranded Credit Card on RuPay Platform:

IRCTC and SBI have together launched a new Co-branded Contactless Credit Card on the RuPay Platform of NPCI. Central Paramilitary Forces are assisted with their reserved train ticket requirements and associated warrant management system. The Card is designed to reward Frequent Railway Travellers, wherein the new Co-branded Credit Card offers the rail passengers maximum savings proposition on their travel together with exclusive benefits on retail, dining and entertainment as well as transaction fee waivers.

Travel & Tourism :

• INDIA IS A DIVERSE COUNTRY WITH A KALEIDOSCOPE OF TRADITIONS, CULTURE AND VIBRANT GEOGRAPHIES.

• 07% contributed to total operating revenue
• 2,55,281 Passengers availed Tejas train services
• 25 Chartered Trains operated
• 2,426 Average air tickets booked per day

Indian Railways has introduced a new era & a paradigm shift of train travel experience with enhanced comfort with the conversion of Rajdhani Express coaches with new upgraded Tejas Trains.

Tejas Train:

Maharaja Express:

Services Offered

• Bharat Darshan Tourist Trains
•  Rail Tour Packages
•  Domestic Air Packages
•  International Air Packages
•  Buddhist Circuit Tourist Train
•  Deluxe Tourist Train
•  Golden Chariot Train
•  Maharajas’ Express
•  Train Coach and Saloon Charters
•  Customized Tours.

Packaged Drinking Water (Rail Neer)

Packaged drinking water is one of the most common items sold across the country. No seminars or conferences are complete without packaged drinking water. The packaged drinking water market in India is valued at $24 billion as of 2019 and is expected to reach $60 billion by the end of 2023. However, a 30% contraction has been noticed in this segment due to the pandemic.

• The average daily requirement of Packaged Drinking Water on Indian Railways is approximately 18-20 lakh litres/day. IRCTC’s production capacity is around 14.08 lakh litres/day.

Present Plant Locations:

•  Nangloi (Delhi)
•  Danapur (Bihar)
•  Palur (Tamilnadu)
•  Ambernath (Maharashtra)
•  Amethi (Uttar Pradesh)
•  Parassalla (Kerala)
•  Bilaspur (Chhattisgarh)
•  Hapur (Uttar Pradesh)
•  Sanand (Gujrat)
•  Mandideep (Madhya  Pradesh)
•  Nagpur (Maharashtra)
•  Sankrail (West Bengal)
•  Maneri (Madhya Pradesh)
•  Jagiroad( Assam)

Upcoming Railneer Plant:

•  Una (Himachal Pradesh)-Commissioned. 
•  Commercial production to be started.
•  Bhusawal (Maharastra)- Advance stage of commissioning Vijayawada and Simhadhri (Andhra     Pradesh)- advance stage of civil construction.
•  Bhubaneswar (Orissa)- under tendering process.
•  Kota (Rajasthan)- under tendering process.

Key Initiatives by Railneer:

600 kW Solar Power Generation:

IRCTC has installed a solar PV power plant of a total 600 KW capacity. 120 KW each at five of its’ company-owned Rail Neer plants located at Nangloi (Delhi), Danapur (Bihar), Palur (Tamil Nadu), Ambernath (Maharashtra) and Bilaspur (Chattisgarh). This has reduced the energy bill of Rail Neer Packaged Drinking Water Plants, besides generating revenue from the sale of surplus power to the grid. The yearly consumption of kWh units has been reduced by approx 7.2 lakh units, resulting in cost savings of approx Rs.50 lakhs per annum. 

As per Plastic Waste Management Rules, 2016 and Amendment dated March 2018, IRCTC, as the manufacturer of Rail Neer, has to fulfil its obligation towards Extended Producers Responsibility (EPR). Under EPR compliance, IRCTC has to arrange the collection and supply of scrap plastic materials, mainly PET bottles to Plastic Recycling plants. During 2020-21, IRCTC used 1650 MT of Plastics, primarily PET bottles. To fulfil its obligation towards Extended Producers Responsibility, IRCTC has engaged an agency for arranging EPR compliance. IRCTC has registered as the brand owner at Central Pollution Control Board New Delhi and has been ensuring EPR compliances to CPCB for achieving the target.

Reduction during sourcing/production/distribution achieved since the previous year throughout the value chain:

Measurement of usage of water, fuel, per unit is carried out at plant level at regular intervals. As of date, the specific energy consumption of 0.05 kWh per bottle and groundwater extraction of 1.6 litres has been recorded for the production of 1-litre water bottles.

To reduce the consumption of PET bottles, IRCTC reduced the weight of PET preform and HDPE cap, optimizing the weight from 22 gm to 20 gm and 2.2. gm to 1.6 gm respectively. This has resulted in the reduction of plastic consumption by approx 195 metric tons annually, at the current production level. The reduced weight of PET preform has resulted in savings of approx Rs.20 paise per preform. IRCTC has manufactured approx 7.5 crore Rail Neer bottles in 2020-21 resulting in savings of approx Rs.1.5 crores. Similarly, the optimized weight of caps contributed to savings of approx  Rs.0.03 per cap, translating to Rs.0.22 crore savings in 2020-21.

Competitors in Different Segments :

Strong Growth in Freight Traffic :

• 4th largest Rail freight carrier in the world.
• Freight traffic carried by Indian Railways stood at 1,208.34 million tonnes in FY20 and is estimated to stand at 2,024 million tonnes by 2024.
• The average wagon loading per day in November 2020 was 58,726, which was 4.6% higher than October 2020 (56,128 wagons).
•  As of May 2021, the Indian Railways loading stood at 73.45 million tonnes including 35.62 MT (coal), 9.77 MT (iron ore), 3.38 MT (food grains), 2.22 MT (fertilisers) and 3.15 MT (cement, excluding clinker).
• In November 2020, India Railways announced that 40% of the dedicated freight corridor (DFC) will be opened for traffic by end-FY21, while the entire 2,800 km route will be completed by June 2022.

About Management

Board of Directors

Smt. Rajni Hasija is the Whole-Time Director (Tourism & Marketing) of our Company. She has been on the Board of our Company since May 18, 2018. She is an officer of the Indian Railway Traffic Service (IRTS) of the 1989 batch. She is a science scholar with an M.Phil. from Delhi University. She also possesses a post-graduate diploma in Human Resource Management and a degree in Law. In her illustrious career in Indian Railways spread over 29 years, she has worked in various managerial capacities in various divisions, zones as well as various Public Sector Undertakings and has extensive experience in the field of IT, marketing, operations and planning over Indian Railways. She has also been associated with IRCTC in the capacity of Group General Manager handling IT business segment and also overall in-charge of an entire zone. Smt. Hasija had a pioneering role in the inception and development of the internet ticketing site of railways. With her sound technical knowledge, organizing and planning skills and ability to communicate with her peers and team, she has completed very challengingly and time-bound projects for IRCTC, which ranged from planning and execution of the dynamic online cum counter ticketing platform for Commonwealth Games 2010 to International Marketing of Maharajas’ Express Luxury Tourist Train. She also holds the additional charge of Director (Catering Services).

Click here Board of Directors to know about Other Board of Directors.

Strategies / Initiatives Taken by the Management  :

TURNAROUND STRATEGIES FOR FREIGHT TRAFFIC:

• Axle load was increased from 20.3 tonnes to 22.9 tonnes and 25 tonnes for selected routes and freight discounts were offered to customers offering high tariffs. 
•  The speed of freight trains was increased to 44 kmph in FY21 from 24 kmph in FY20.
• Freight rates on cement, coal, urea, kerosene, LPG and food grain and pulses have been hiked by 10% to bring additional revenue of US$ 655.1 million per year.

Revenue Based Strategies:

• Provision of online rail bookings, hotel reservations and retiring rooms by IRCTC adds to the revenue of Indian Railways. IR focuses on international tourists and has also produced many tour packages for foreigners. 
• Indian Railway has set a target of US$ 5.95 billion in revenue from monetising railways in the next 10 years. By doing so, IR aims to increase earnings through traditional as well as non-traditional sources and reduce expenditure.
• Plans are in place to remove pantry car services from 300 trains and replace them with AC-3 tier coaches to increase revenue by Rs. 1,400 crores. According to the Railway Ministry, meal service will rely on base kitchens at railway stations, e-catering and train-side vending machines.

These decisions have been made in response to a revenue and expense audit report compiled by the AIRF.

GO ECO-FRIENDLY

• The Railway Minister, Shri. Piyush Goyal, announced on November 29, 2020, that tea will be sold in environment-friendly 'Kulhads' (earthen cups) in place of plastic cups at all railway stations in the country. Currently, more than 400 railways stations serve tea in ‘Kulhads’. This strategy will be the contribution of the Indian Railways towards a plastic-free India.

• The Indian Railways has fulfilled its pledge of installing bio-toilets in passenger trains. As of July 2021, 258,906 bio-toilets have been installed across 73,078 passenger train coaches.

Turnaround Strategy for Passenger Traffic

• The length of popular trains was increased from 16-18 coaches to 24-26 coaches. 
•  Private participation is encouraged. Information Technology was used to make ticket reservations more feasible to passengers along with an airline-style up-gradation facility from lower class to a higher class. 
•  The speed is expected to be raised to 160 kmph on Delhi-Mumbai and Delhi-Howrah routes by 2022-23. The passenger trains have got approval to raise 60% increase in average speed. 
• Fare for premium classes was reduced to compete with airlines, luxury buses and personal transport vehicles.

Infrastructure Development

• It is estimated that India will require US$ 4.5 trillion of infrastructure investment by 2040 to enhance economic growth and community well being. Under the Union Budget 2021-22, the government allocated Rs. 110,054.64 crore (US$ 15.19 billion) to the Ministry of Railways. 
•  Indian Railways is planning an annual capital expenditure of Rs. 2 lakh crore (US$ 27.18 billion) until FY24 in line with the robust infrastructure upgrade envisaged for the railway network.
•  Rail Land Development Authority (RLDA) is working on long-term planned projects worth Rs. 50,000 crore (US$ 6.74 billion) for redeveloping 123 railway stations, across the country, on a self-sustainable model, which is in line with the smart city projects.
• The Indian Railways is likely to deliver 58 supercritical as well as 68 critical projects worth more than Rs.1,15,000 crore (US$ 15.44 billion) in the next few years. 

  27 supercritical projects will be completed by December 2021, while two projects will be handed over by March 2022. 29 supercritical projects—spanning 1,044 km and costing 

Rs. 11,588 crores ($ 1.5 billion)—have been commissioned. 

 Four projects worth Rs.1,408 crore (US$ 189.05 million) have been completed and the remaining projects are targeted for completion by March 2024.

Risks of the Company :

Internal  Risk Factors:

1. Our business and revenues are substantially dependent on Indian Railways. Any adverse change in the policy of the Ministry of Railways may adversely affect our business and the results of operations. 

2. Our Company and Directors are involved in certain legal and other proceedings. 

Our Company and Directors are currently involved in certain legal proceedings. These legal proceedings are pending at different levels of adjudication before various courts and tribunals. The summary of outstanding litigation about criminal matters, tax matters, actions by regulatory/ statutory authorities and matters above the materiality threshold involving our Company and Directors have been set out below.

         3. We are the sole provider of online railway ticketing, catering services, packaged drinking water for trains and stations, and certain other services we provide; if the Government were to allow open competition in all or any of these areas, it may impact our financial results.

4. Our business can be negatively affected if we are unable to maintain quality standards.

5. We rely on information technology to operate our internet ticketing and tourism business and maintain our competitiveness; any failure to adapt to technological developments or industry trends could harm our business.

6. We are exposed to risks associated with online security, security of our customers’ personal information and credit card fraud; failure to manage these risks may expose us to litigation, liability and damage to our reputation and brand image. 

7. Change in haulage charge principles by Ministry of Railways on the trains we operate could adversely affect our business, financial condition and result of operations. 

8. We use PET bottles and other plastic items for our packaged drinking water, which is subject to various regulatory requirements and increasing public scrutiny.

9. Our travel and tourism and packaged water segments experience seasonal fluctuations due to periodic local and national elections, weather changes as well as holidays; as such, quarterly financial data comparisons may not be meaningful. 

External Risk Factors:

1. Our Company will continue to be controlled by the Government of India.

2. If there is any change in tax laws or regulations or their interpretation, such changes may significantly affect our financial statements for the current and future years, which may have a material adverse effect on our financial position, business, and results of operations.

3. Recent global economic conditions have been unprecedented and challenging and continue to affect the Indian market, which may adversely affect our business, financial condition, results of operations and prospects.

Government Initiatives for Indian Railways :

• The National Rail Plan aims to increase the modal share of railways in transportation through infrastructure development and capacity expansion, to fulfil increased demand for railway services by 2050.
• The Government has allowed private participation in operating passenger trains to improve punctuality, reliability and maintenance of the railway network. It is expected to be a revenue-sharing model and 109 pairs of origin destinations, in 12 clusters, have been selected for the bidding. It is expected to attract  30000 crores of investments from the private sector.
•  To ensure passenger safety and prevent Covid-19 infection, the Indian Railways developed Post-Covid coaches with copper-coated handles and locks, hands-free water tanks and flushes.
•  A feasibility study on seven bullet train projects was approved by the Ministry of Railways. 
•  To encourage FDI investments, the Government has started a Project Development Cell (PDC).
•  In October 2021, India and Nepal signed an MoU (Memorandum of Understanding), for a proposed US$ 3.15 billion railway line project, to connect Kathmandu and the Indian border town, Raxaul.
• In June 2021, the Central Government approved the implementation of a 235 km semi high-speed rail corridor between Pune and Nashik in Maharashtra. The cost of building this project will be Rs.16,039 crore (US$ 2.20 billion).
•  In June 2021, the Central Government approved an Rs. 25,000 crore (US$ 3.43 billion) five-year plan to use 4G technology to modernise communication networks in railway stations and improve the safety and security of train journeys.

Shareholding Pattern of the Company :

Top 10 Shareholders as of March 31,2021:

Click here for Shareholder's Complaints.

As above we can see that FIIs & DIIs have reduced their Holdings from last three Quarters

Key players supporting Indian railways

- Key organisations supporting Indian Railways

1.

• Navratna PSU under India’s Ministry of Railways
• Carrier, terminal operator and warehouse operator

2.

 

• SPV set up under the Ministry of Railways
• Undertakes planning and development; mobilisation of financial resources; construction, maintenance and operation of the Dedicated Freight Corridor (DFC)

3.  

• SPV created by the Government of India 
•  Builds engineering works required by Indian Railways

4.

• Mini Ratna PSU with one of the largest neutral telecom infrastructure providers in 

the country

• Strives to modernise train control operation and safety system of Indian Railways

Opportunities:

•  The high growth rate in Hospitality & Tourism segment.
•  Growth in online business; IT and E-Governance.
•  Joint Venture with other Government bodies.
•  Benchmarking international standards in mobile catering through multilateral collaborative agreements with foreign railways and mobile catering players.

Core Strengths:

•  IRCTC is the only Company authorised to sell railway tickets online.
•  It has become a ‘One-Stop Solution’ in the travel industry, offering a range of services including online ticketing, tour packages, packaged drinking water and catering.
•   IRCTC is the only company to distribute packaged drinking water across all stations as well as trains in India. The Company has also installed ATVM’s for selling mineral water at lower prices.
•  IRCTC is the only authorised entity to provide catering services in trains. To expand its services, the company has installed food plazas/stalls across all stations in India in a bid to increase its market share. The company’s relentless focus on quality food drives it to deliver hygienic food prepared by professionals.
•  The company has a strong presence in the travel and tourism industry with special trains running for domestic and international travellers, showcasing India’s rich cultural heritage. The company has also tied up with private entities to position itself as a one-stop solution for customers in the tourism and hospitality industry.
•  The Company’s strong leadership and expert management team offer strength to deliver strong financial results and constant growth, year after year.

Threats:

• All PSU companies do not focus on Profits because they run organisations/companies with the intent of serving the Nation. 

eg: The objective of PSU Bank is Network Extension.

• The Company’s business and its revenues are substantially dependent on the policies of the Ministry of Railways and operations of Indian Railways. Any policy change or any adverse decision may affect the revenue of the Company e.g. in 2016 the decision to scrap service fees affected the Company’s revenue.
•  If the GOI or the Ministry of Railways opens up the market for private players then the Company can lose its market monopoly.
•  Any adverse change in the policy of the Ministry of Railways.
•   Any failure to maintain or enhance consumer awareness of our brand.
•   Inability to implement our growth strategy successfully including with Catering, Travel and Tourism, internet–ticketing business.
•   Declines or disruptions in the travel industry.
•  The Company’s packaged drinking water is served in plastic bottles and non-biodegradable wraps are also used for food packaging. The choice of the ingredients poses an environmental threat that needs to be efficiently mitigated.
•  Financial mismanagement or negligence could negatively impact the business operations, financials and any ongoing projects.
•  Fluctuations in operating costs and impact on financial results.
•  Any adverse claims, media speculation and other public statements relating to the food quality, catering facilities and service.
• Unfavourable current economic conditions and political situation in India.

Financial Analysis

Snapshot of Financials

Profit & Loss Statement:

Quarterly Wise Results

Balance Sheet

Cash Flow Statements

Financial Ratios

Discounted Cash Flow Model

>To download file of financial Analysis (Excel File)

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