Institutional bids in IRCTC OFS strong; is it worth buying for retail investors?

The government received bids for 5,55,10,454 shares in the OFS from institutional investors against the offer size of 1,80,00,000 for the category, according to the data on the BSE website. This gave the government an opportunity to use the greenshoe option of 1,80,00,000 additional shares.

The 7% discount offered in the OFS and the bullish outlook for the company’s growth prospects were the reasons driving the strong demand for the stock. The floor price for the OFS was set at Rs 680 a share.

Shares of the company ended 6.2% down at Rs 689.05 on the National Stock Exchange. Given the steep discount in the OFS, traders dumped it in the open market to subscribe to it.

The OFS will open for retail investors on Friday, when institutional investors too, can place

their bids. The government has reserved 10% of the OFS for retail investors.

Should retail investors subscribe?

The discount offered in the OFS does make it a compelling investment opportunity, but money managers don’t think so purely because of the valuation.

stock trades at 61.6 times its trailing 12 month earnings, according to Trendlyne.

Year-to-date, shares of IRCTC have fallen 17% and is the only one within the railway PSU space to give negative returns. But, the stock tripled in value in 2021, giving the best-ever returns to investors.

“IRCTC is like Indigo for railways,” a senior fund manager at a domestic asset management company said. “The only logic behind investing in the stock is the expected growth in passenger traffic, and this is already priced into the stock. I wouldn’t really look at subscribing because it’s not a cheap stock by any standard.”

Ayush Aggarwal, chief investment officer at SMC Private Wealth, too, believes that valuations aren’t comfortable enough even after the correction seen in the stock this year.

“This year we did add IRFC (

) and to our portfolio within the railway PSU pack. While IRCTC’s business model is very good, we would want to enter only when valuations are reasonable,” Aggarwal said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)