Indian Railway Catering and Tourism Corporation (IRCTC) has announced a stock split that will divide its shares into 5 equity shares. The business announced the selection along with its quarterly final results yesterday. The stock split will see the face worth of IRCTC’s share drop from Rs 10 every to Rs 2 every. The move, even so, is topic to approval from the Ministry of Railways and other shareholders. Since listing on the stock exchanges, IRCTC has soared a huge 734% from its IPO value of Rs 320 per share to now trade at Rs 2,668 per share.
IRCTC announced its selection to split the stock along with its quarterly final results exactly where the business reported a net profit of Rs 82 crore, up from the Rs 24 net loss that IRCTC recorded in the very same period last year. IRCTC’s income from operations was up 85% to Rs 243 crore, compared to Rs 131 crore in the corresponding quarter last year.
Stock split to attract tiny investors
The PSU firm stated that it decided to split the stock to comply with the suggestions on capital restructuring of Central Public Sector Enterprises issued by the Department of investment and Public Asset Management (DIPAM), Ministry of Finance. Further IRCTC plans to improve the liquidity in the capital market place to widen shareholder base and to make the shares economical to tiny investors.
“A stock split is a corporate action in which a company increases the number of its outstanding shares by issuing more shares to current shareholders. The primary motive of a stock split is to make shares seem more affordable to small investors,” Ashish Chaturmohta, Director Research, Sanctum Wealth Management told TheSpuzz Online. He added that the move will make IRCTC stock conveniently accessible for retail investors, who now make up practically 45% of the market place participants. “The announcement is a positive move and (will) encourage retail investors to participate,” he added.
The share split will boost the quantity of IRCTC shares from 25,00,00,000 of face worth Rs 10 every to 125,00,00,000 equity shares of face worth of Rs 2 every. So far this year, IRCTC’s share value has soared 84%. “A stock split does increase participation in the stock and results in buying post the split, according to Vishal Wagh, Head of Research, Bonanza Portfolio.
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Should you buy?
IRCTC has helped investors pocket smart returns since its listing in October 2019. Operating in a monopolistic market, IRCTC enjoys certain perks that attract investors towards it. “IRCTC in simple words, is a platform company having a monopoly business in passenger train booking. It is a B2C company with robust cash flow. Hence this company is a buy on dip candidate,” stated Ashish Chaturmohta.
However, on the technical side, IRCTC is seen as a stock to clearly prevent by Vishal Wagh. “The up-move in IRCTC will get stalled if the stock does not break the level of Rs 2,750 at the earliest. On the downside the stock could go to Rs 2,300 apiece,” he added. Vishal Wagh added that investors need to exit the stock even though it sits beneath Rs 2,750, with no waiting for the split to come into force.