Stock Split: A Case of IRCTC
| Case Code: FINC189 Case Length: 8 Pages Period: 2020-21 Pub Date: 2022 Teaching Note: Available |
Price: Rs.300 Organization: Indian Railway Catering and Tourism Corporation Limited (IRCTC), Industry: Travel & Tourism Countries: India Themes: Stock Split, Corporate Finance |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Financial Performance of IRCTC
By offering multi-service solutions to both domestic and international customers, IRCTC was able to achieve around 71% growth in net profit over the previous year with it increasing from Rs. 3.08 billion in FY2018-19 to Rs. 5.28 billion in FY2019-20. But due to the impact of the Covid-19 pandemic, the net profit of the company decreased to Rs. 1.89 billion in FY2020-21 (Refer to Exhibit I for selected financial numbers of IRCTC)..
Share Price Movement
After IRCTC was listed in the exchanges at Rs. 881.70 on October 14, 2019, the share price showed an upward momentum and touched the Rs. 1,930.05 level on February 20, 2020. On February 24, 2020, the company declared an interim dividend of Rs. 10 per share. After the dividend declaration, its share price fell to Rs. 982.55 in March 2020. However, the share price of IRCTC later began recovering and it touched Rs. 1,384 in September 2020..
The Stock Split
As per the decision of the IRCTC Board, October 28, 2021, was set as the ex-date of the Stock split, and October 29, 2021, was decided as the record date of the stock split. Following this decision, on October 28, 2021, the company did the stock split in the ratio of 1:5. Accordingly, each stock of IRCTC at a face value of Rs. 10 was split into five equity shares with a face value of Rs. 2 each. This meant that an investor holding a single share of IRCTC before the share split became the owner of five shares of the company after the stock split. However, the total market capitalization of the company remained almost the same..
Road Ahead
A sound financial position of the IRCTC along with the authorization of the GoI helped IRCTC create a monopoly market in India by acquiring the market share of 73% and 45% by October 2021 in the online train ticket bookings and packaged drinking water segments respectively. After the lifting of the Covid-19 lockdown, many people were expected to opt for traveling by train and for this to lead to an increasing number of transactions on the IRCTC website and mobile app. IRCTC also planned to enter the tour and travel planners business..
Exhibits
Exhibit I: Selected Financial Numbers of IRCTC (From FY19-FY21)
Exhibit II : Shareholding Pattern of IRCTC as on September 2021
Exhibit III : Monthly Share Price Movement of IRCTC (October 2019 – December 2021)
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