- ITC shares crashed after the government constituted a committee to suggest a taxation policy on tobacco.
- IRCTC shares have also lost Rs 30,000 crore in the last two days.
- Gurmeet Chatha, Co-Founder, Complete Circle Consultants, spoke about the future of these two companies.
What is your opinion on IRCTC?
On the part of IRCTC, he said that the rewrite started on getting involved with new age platforms. To take a look at the stats, last year it booked around 175 million tickets, resulting in a revenue of around Rs 300 crore from service charges. Then there is advertising revenue and revenue from commission on food products, which has also been increased and so is the expansion of Railway Neer. All these sections are continuously growing and it is currently operating around 1500 odd trains. It has around 250-260 pantry cars out of 400. As more trains run, revenue will increase, but the valuation it is getting is for the entire platform player, not just three or four businesses.
That is, a new era of business is being given importance. The main thing to keep in mind here is how their payment gateway iPay converts. Can it be used for other PSU business also? As it grows, we will have to see if it is able to cross-sell web traffic. It is the most traded website in Asia Pacific. If so, then these assessments can be justified. However, these valuations can be a bit risky if not implemented.
It has always been a hanging sword and now it seems to be reaching ITC’s neck, as the government is considering setting up an expert group on tax on tobacco, which will suggest a rate for the next budget. Is this unfortunate, as the increase in ITC had just started?
Certainly and to some extent the concern is justified from the market point of view. 83 percent of the company’s EBITDA still comes from the cigarette business. Whereas e-choupal business is proving very useful for its food business and growing rapidly.
Similarly, the paper business pushes it into packaging, which is used by myself and other FMCG companies. This is a good consumer business. But, the taxation on ESG and cigarettes is very high. I agree with what you said in terms of evaluation. This is the fairest part currently available. We can expect the FMCG business to be diversified so that the value can be unlocked.
Once the tax is settled and the uncertainties are removed, we have a clear road ahead. Also, it is very reasonable at current levels. It is one of the most appropriate stocks and we are not expecting any further downside. It is possible to invest in it if there is a shortage.