Shares in the catering and ticketing arm of state-run Indian Railways more than doubled in value after its debut on Mumbai’s Sensex stock exchange Monday, as New Delhi looks to raise funds and kickstart a stuttering economy.
Indian Railway Catering and Tourism Corp Ltd (IRCTC), which has a monopoly on online ticket sales, enjoyed a massive initial public offering (IPO) that was oversubscribed nearly 112 times.
Shares opened at 644 rupees ($9.05), peaking at 743.80 rupees before ending at 728.60 rupees — 127 percent higher than the issue price of 320 rupees.
Analysts say Monday’s performance, while not in line with valuations of other public sector IPOs this year, offers hope to India’s beleaguered government, which is aiming to raise 800 billion rupees this fiscal year after announcing a cut in the corporate tax rate.
They added that the huge demand was in part caused by the small number of shares released by the government, and by how well-known the IRCTC is in India, home to one of the world‘s largest rail networks.
“The shares are riding on unsustainable speculative expectations,” founder of Mumbai-based Equinomics Research and Advisory Private Limited, G. Chokkalingam, told AFP.
“There will be course correction, hence government should offload more and generate revenue rather than letting speculators reap the benefits.”
Asia’s third-largest economy has been in the throes of a prolonged slowdown, with growth rates falling to five percent in the June-ended quarter as consumer demand shrinks.
The automobile sector, often seen as a barometer of economic health, reported a sales slowdown for the eleventh month in September as major manufacturers including Ashok Leyland and Mahindra & Mahindra halted production.
Earlier this month ratings agency Moody’s revised the country’s GDP growth forecast to 5.8 percent for the financial year 2019-20, lower than the 6.1 percent predicted by India’s central bank.
Besides online ticketing, IRCTC also operates a catering service and sells packaged drinking water and tourism holiday packages.
India’s colonial-era railway system has long struggled to cope with the demands placed on it by millions of daily passengers and suffers from massive underfunding.
Following the market listing, the Indian government owns an 87.4 percent stake in the company.