Govt rolls back convenience fee decision on IRCTC; stock recovers after falling 28%

The government has rolled backed decision to charge 50% of revenue of the Indian Railway Catering & Tourism Corporation (IRCTC) that the railways ticketing arm earns from convenience fee.  

The decision comes only a day after the government asked the IRCTC to share 50 per cent of the convenience fee with the Railway ministry.  

Ministry of Railways has decided to withdraw the decision on IRCTC convenience fee pic.twitter.com/HXIRLxXTlL

— Secretary, DIPAM (@SecyDIPAM) October 29, 2021

Shares of IRCTC recouped losses after falling by a little over 28 per cent on the BSE in the first 30 minutes of trade. The stock hit a low of Rs 650.10 before bouncing back.

#BigBreaking | #IRCTC के लिए बड़ी खबर...#ZeeBusiness ने कहा, सरकार ने माना...

DIPAM सचिव का बड़ा बयान

कन्वीनियंस फीस शेयर करने का फैसला वापस : विनिवेश सचिव#IRCTCsplit | #IrctcShare | @AnilSinghvi_@RailMinIndia | @PMOIndia | @AshwiniVaishnaw pic.twitter.com/jdRtXDCYA2

— Zee Business (@ZeeBusiness) October 29, 2021

Earlier, expressing surprise over the government's decision, Anil Singhvi had urged the government to review its decision in favour of all stakeholders
 

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Anil Singhvi had said this is bizarre as the shareholders bought this stock keeping in mind that revenue model of the company will not be tweaked.

#EditorsTake | अनिल सिंघवी की सरकार से अपील, #IRCTC पर
वापस लें फैसला

रेवेन्यू बढ़ाने के लिए सरकार को अनिल सिंघवी ने क्या सुझाया दूसरा ऑप्शन?

अब @IRCTCofficial के शेयरधारकों को क्या है अनिल सिंघवी की सलाह?@AnilSinghvi_ | @RailMinIndia | @PMOIndia | @AshwiniVaishnaw pic.twitter.com/4b6oiSrXIN

— Zee Business (@ZeeBusiness) October 29, 2021

"If the government is making such changes in revenue model of IRCTC, how can it ask other companies when they resort to such tactics. The anger of people is justified here," said the Market Guru.  

Also Read: IRCTC tanks 20% as Railway ministry asks to share 50% of revenue from convenience fee

Singhvi had said the decision should be reversed as it will help all stakeholders, including the government, the IRCTC and retail shareholders. Zee Business Managing Editor said earlier if the government, which holds 67% stake in the company, sells 2 per cent of its stake almost all requirements of the government will be taken care of. " How does it matter that the government holds 67% or 65%? If the government cuts 2 per cent stake in the railways ticketing arm shares and make an FD of the revenue generated from it will be more than IRCTC convenience fee. This is a basic calculation without hurting any party. The ultimate goal is to earn revenue and that will be met if the government acts accordingly," said Singhvi.  

He further said that this will hurt IRCTC's prospect as a company with market cap size of Rs 1-lakh will come down to Rs 40,000 crore if decision is not reversed. "Infact, it is difficult to say how much it will affect IRCTC in the longer run. It may even reduce further, depending on people's anger," said the Market Guru, adding that this move will also hurt the government's disinvestment plans going forward.  

Meanwhile, as the government decided to rollback decision, IRCTC stocks recovered to some extent from early morning trade losses and closed the Friday at Rs 842.05, down Rs 71.70 or 7.85% on BSE.