What are your thoughts on ?
The rerating in IRCTC happened when it was clubbed with the new age platform businesses. Just to give you a perspective on the numbers, last year, they booked about 175 million tickets which resulted in some Rs 300 crore of income from convenience fee. Then there is advertisement revenue and there is revenue from commission on food products which also has been increased and there is Railway Neer where also they are expanding.
All these segments continue to grow. Currently they are operating around 1500 odd trains, about 250-260 with pantry cars out of 400. As more and more trains get operational, the revenues will pick up but the valuation it is getting is of an aggregate platform player and not just on the three, four businesses.
So, it is being valued as a new age business. The key monitorable here is how their payment gateway platform iPay transforms. Can it be used for other PSU businesses as well? As it picks up, we have to see if they are able to cross sell the web traffic. It is the highest transacted website in Asia Pacific. If that pans out then these valuations can be justified, but if execution does not happen then these valuations could be a bit of a risk.
It was always a hanging sword and now it seems like it is only getting closer to ITC’s neck as the government is looking to form an expert group on tobacco taxation which is going to suggest rates for the next Budget. This is unfortunate because the up move had just begun on ITC?
Absolutely and the concern is to a certain extent fair also from a market perspective. 83% of the company’s EBITDA still comes from the cigarette business while the e-choupal business gives it a great sourcing edge for the food business and has been growing quite steadily.
Similarly the paper business gives it a packaging edge which is used by itself and other FMCG companies. It is a good consumer business. But there is the overhang of ESG and cigarette taxation. Valuation wise, I agree with what you said. It is one of the most reasonable consumer stocks available right now. We can hope that eventually the FMCG business will get demerged so that value unlocking can happen.
Once the tax thing is done and dusted, hopefully we will have a clearer outlook going forward. But it is pretty reasonable at these levels. It is one of the most reasonable stocks and we do not see much downside either. One can possibly start accumulating it on declines.
