8th Jan, 2023
Welcome to this week’s edition of Three Point Five. In this edition, we will take you through the exceptional journey of IRCTC – a story of adaptation, resilience, and growth.
IRCTC is the only entity authorised to provide ticketing services to the Indian Railways
While ticketing remains the primary source of income, catering and tourism are gaining significance in the revenue pie
There has been a consistent increase in tickets booked and passengers travelling in the past 10 years
The company has grown significantly in recent years, with a total income increase of 127% and an after-tax profit increase of 255% in FY22 compared to FY21
IRCTC has adapted to the increase in online payments by launching IRCTC Rail Connect smartphone app and 'imudra' e-wallet platform
While there is an early-mover advantage that can be capitalised on, the scale makes it challenging to adapt and grow. Only time will tell if IRCTC continues its upward trajectory
IRCTC is a public sector enterprise wholly owned by the Ministry of Railways. IRCTC is primarily responsible for most of the amenities that we utilise during train journeys —
Packaging drinking water under the "Rail Neer" brand
Travel and tourism
What makes IRCTC unique is that it is the only entity authorised to provide these services to the Indian Railways. There are a few other accomplishments that make IRCTC attractive —
It books an astonishing 1.1 million tickets and serves over 35,000 meals daily
By launching Tejas Express in 2017, IRCTC became the first organisation to operate its train in India
While it started as a ticketing platform, the sources of revenue for IRCTC are evolving with time.
While ticketing remains the primary source of income, catering and tourism are gaining significance in the revenue pie:
IRCTC has also invested heavily in technology and infrastructure, making its services faster and more reliable. This has helped the company become one of the most trusted names in the railway ticket booking space.
The most significant factor that has contributed to IRCTC's success in the recent past is its strategic partnership with other leading players in the industry. By working with banks, travel agents, and other third-party vendors, the customer base has increased considerably in the past ten years. From 10 million customers in 2012, IRCTC has over 100 million customers now.
With such efforts, it became one of the most profitable companies within the Indian Railways, accounting for more than 60% of the turnover.
The market capitalisation of IRCTC is Rs 51,000 crore at present. The company has grown from a ticketing platform to a multi-billion dollar business.
A few highlights of the company's performance —
Total income increased 127%, and profit after tax went up by 255% in FY22 (compared to FY21)
It has delivered profit growth of 23.8% CAGR over the past five years
Despite the impact of the covid pandemic on travel, ticket bookings and passenger travelling have increased consistently
Many don't know that IRCTC struggled to stay afloat until 2012, weighed down by expenses like costly infrastructure repairs.
However, from 2021, things have changed drastically for IRCTC concerning business strategy and financial performance indicators. This change can be attributed to technological advancements in internet penetration throughout India and significant improvements made towards safeguarding data regarding payment gateways used by customers.
As India shines under the UPI revolution, IRCTC has adapted its business to make the most of the willingness of Indians to make online payments and make reservations online.
It has launched IRCTC Rail Connect, which allows users to book tickets through their smartphones.
IRCTC's 'imudra' e-wallet is another winner for the company. With this intuitive platform, users can easily book tickets and send and receive money with the virtual card, while shopping or even withdrawing cash from ATMs is possible using its physical version.
The company wants to increase profits through non-convenience revenue by focusing on tourism and catering while serving the new age tech-savvy Indian.
IRCTC is a classic monopoly business wherein a single entity assumes a dominant position in an industry or a sector. Monopoly businesses such as Hindustan Aeronautics Limited (HAL), Nestle India, and Indian Energy Exchange (IEX) have an early-mover advantage. As India's only authorised entity for railway ticketing services, IRCTC has a strong moat or competitive advantage that allows it to maintain its profitability over the long term.
For now, it seems like there’s no stopping the growth of IRCTC, but being a behemoth comes with its costs. While there is an early-mover advantage that can be capitalised on, the scale makes it challenging to adapt and grow. 2023, and the years ahead, will tell if IRCTC can continue its upward trajectory.