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Brokerage IIFL Securities initiated coverage on Indian Railway Catering and Tourism Corporation (IRCTC) despite rising uncertainty over the Covid-19 pandemic. It believes that the PSU is a play on the normalisation of activity post-Covid.

The brokerage estimated 24% annualised growth in earnings per share in FY20-23. IIFL Securities believes that accelerated adoption of online ticketing, conversion of unreserved coaches to 2S class, increase in capacity in the packaged drinking water segment and resumption of private trains may support IRCTC going forward. IIFL Securities has set a target price of Rs 2,174 for IRCTC with a horizon of 12 months.

Shares of the company traded 0.22% higher at Rs 1,760 at around 12.20 pm (IST). On the other hand, BSE Sensex was up 128 points, or 0.26%, at 49,637 at around the same time.

However, IIFL Securities highlighted that rising Covid cases and delay in recovery are among the near-term risk for IRCTC. On the other hand, it added that the company’s low fixed-cost model and healthy net cash position lend comfort.

“Medium-term risks are change in scope of catering by the Ministry of Railways and potential adverse regulation as the government of India’s stake in IRCTC comes down,” IIFL Securities said.

IRCTC, set up in 1999, is 67.4% owned by the Government of India (GoI) and is under the administrative control of the Ministry of Railways. IRCTC was 100% owned by the GoI until its IPO in October 2019, when the government sold a 12.6% stake. It was subsequently followed by an OFS (offer for sale) in December 2020, in which the government sold another 20% stake.

IRCTC is the only entity authorised by the Indian Railways (IR) to provide catering services to railways, online railway ticketing services and packaged drinking water at railway stations and inside trains. It operates in four business segments, namely internet ticketing, catering, packaged drinking water under the Rail Neer brand, and travel & tourism.