IRCTC May Take Flipkart Route To Growth

by CXOtoday News Desk    Mar 18, 2015

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The Indian Railway Catering & Tourism Corporation (IRCTC), which operates one of the country’s biggest e-commerce portals, is looking to hire a consultant. Experts believe this step will help the agency to assess and increase its valuation, a move seen as the first step to a public listing, reads an ET report. “We are trying to exploit the site. Our growth will come from there. We have been asked by the government to grow like Flipkart,” chairman and managing director AK Manocha told the news site.

IRCTC’s decision suggests that the government wants to monetize railways assets. IRCTC has started speaking to consultancies, says the report. “For now, it is just evaluating and seeing how much it can fetch if it goes for an initial public offering (IPO). It wants a ballpark figure. It hasn’t got into the IPO mode yet,” a source, who did not want to be named, said the report.

The unit of Indian Railways expects to post its highest-ever net profit of Rs 85 crore on revenue of Rs 1,000 crore this fiscal, its growth driven by e-ticketing and the introduction of several trains last year. Maocha said that profit is expected to increase 35% to Rs 115 crore in the next financial year, driven by new services and advertising revenue.

Despite the e-commerce buzz in the country, most company’s posted losses in recent quarters. IRCTC is targeting Rs 10,000 crore of revenue by 2025 and is very different from other e-commerce companies. Flipkart, the country’s largest etailer, with close to $11 billion even as it continues to post losses after six years of operations. Other online portals including MakeMyTrip, Yatra and Cleartrip are also in the red.

IRCTC accounts for almost 40% of India’s online travel. The most valuable part of its business is the e-ticketing segment, industry sources told the news site. The corporation sells e-tickets worth Rs 20,000 crore annually compared with Flipkart’s gross merchandise sales of about Rs 25,000 crore. IRCTC earns a commission on each ticket sold, which makes up for 30% of its revenue and 60% of profit. Other segments — catering and tour packages — which account for 30% of revenue each will get lower valuations.

 IRCTC’s strategy is aimed at increasing traffic to the website and cashing in on it by selling online space to advertisers.