Indian Railway Catering & Tourism Corporation Ltd:Annual Report 2023-24 Analysis

Indian Railway Catering And Tourism Corporation Ltd. (IRCTC): A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

IRCTC was established on September 27, 1999, as a wholly-owned subsidiary of the Indian Railways. The primary objective was to professionalize the catering and hospitality services, online ticketing, and tourism operations of the Indian Railways.

Headquarters Location and Global Presence #

The headquarters of IRCTC is located in New Delhi, India. While primarily focused on the Indian market, IRCTC also offers international tourism packages.

Company Vision and Mission #

• Vision: To emerge as the leading integrated service provider in catering, hospitality, travel and tourism.
• Mission: To enhance customer experience through continuous innovation, service excellence and ethical practices.

Key Milestones in their Growth Journey #

• 2002: Launch of online railway ticket booking platform.
• 2006: Introduction of e-catering services.
• 2008: Introduction of ‘Rail Tourism’ packages.
• 2019: IRCTC got listed on NSE and BSE
• 2021: Launch of ‘IRCTC iPay’ payment gateway.

Stock Exchange Listing Details and Market Capitalization #

IRCTC is listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Recent Financial Performance Highlights #

Details of IRCTC’s financial performance, including revenue, profit margins, and key financial ratios, would require accessing their official financial statements and investor relations documents.

Management Team and Leadership Structure #

The management team typically consists of experienced professionals in the fields of railway operations, catering, tourism, finance, and technology. The leadership structure follows a board of directors.

Notable Awards or Recognitions #

IRCTC has received numerous awards and recognitions for its services in catering, tourism, and e-governance. These include awards for:

• Best Tourism Promotion Organisation
• Excellence in e-Governance
• Quality in Catering Services

Their Products #

Complete Product Portfolio with Categories #

• Catering Services:
  • Onboard Catering (Trains)
  • Static Units (Restaurants, Food Plazas at Railway Stations)
  • Base Kitchens
  • Rail Neer (Packaged Drinking Water)
• Online Ticket Booking:
  • Rail Tickets
  • Flight Tickets
  • Bus Tickets
• Tourism:
  • Rail Tour Packages (Domestic and International)
  • Hotel Bookings
  • Air Packages
  • Adventure Tourism
• Other Services:
  • Lounge Services
  • Cloak Room Services
  • Advertising

Flagship or Signature Product Lines #

• Rail Neer: IRCTC’s packaged drinking water brand.
• Online Rail Ticket Booking Platform: The primary portal for booking railway tickets in India.
• Bharat Darshan Tours: Affordable rail tour packages covering popular destinations.

Key Technological Innovations or Patents #

• IRCTC iPay: The company’s own payment gateway for seamless transactions.
• AI-powered chatbot AskDisha: Customer service and inquiry platform.
• Integration with various payment platforms (UPI, wallets, etc.)

Quality Certifications and Standards #

IRCTC adheres to various quality certifications and standards related to food safety, hygiene, and service delivery. These may include:

• ISO certifications for food safety and quality management
• FSSAI (Food Safety and Standards Authority of India) compliance

Unique Selling Propositions or Technological Advantages #

• Official platform: Being the official catering and ticketing arm of Indian Railways, IRCTC enjoys a unique position and trust among passengers.
• Extensive Network: A vast network of catering units and tourism infrastructure across the country.
• Large Customer Base: Access to millions of railway passengers daily.

Recent Product Launches or R&D Initiatives #

Recent product launches and R&D initiatives often focus on improving user experience, expanding service offerings, and enhancing operational efficiency. These include:

• Enhancements to the mobile app and website: Improved UI/UX, new features
• Introduction of new tourism packages: Catering to niche segments

Primary Customers #

Target Industries and Sectors #

• Transportation: Railway passengers
• Tourism: Domestic and international tourists
• Hospitality: Hotel guests, restaurant patrons

Geographic Markets (Domestic vs. International) #

• Domestic: Primarily focused on the Indian market.
• International: Offers international tourism packages to various destinations.

Major Client Segments #

• Individual Travelers: Passengers booking rail, flight, and bus tickets.
• Group Travelers: Families, students, corporate groups booking tourism packages.
• Corporate Clients: Companies booking travel and accommodation for their employees.

Major Competitors #

Direct Competitors in India and Globally #

• Online Travel Aggregators (OTAs): MakeMyTrip, Yatra, EaseMyTrip
• Other Catering Service Providers: Private catering companies, restaurant chains
• Other Rail Tourism Companies: Private tour operators.

Competitive Advantages and Disadvantages #

• Advantages: Official platform, extensive network, large customer base, brand recognition.
• Disadvantages: Bureaucracy, slower decision-making compared to private companies, dependence on Indian Railways.

How they Differentiate from Competitors #

• Integrated Services: Offers a wide range of services from catering and ticketing to tourism, providing a one-stop solution for travelers.
• Affordability: Focuses on providing affordable travel and tourism options, particularly for the mass market.

Future Outlook #

Expansion Plans or Growth Strategy #

• Strengthening e-catering services: Expanding the network of catering units and improving online ordering platforms.
• Promoting rail tourism: Developing new and attractive tour packages.
• Diversifying into new areas: Exploring opportunities in related sectors such as logistics and hospitality.

Sustainability Initiatives or ESG Commitments #

Details of specific sustainability initiatives and ESG commitments of IRCTC would need to be obtained from the company’s official reports and statements.

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from Operations: Increased by 20.58% from ₹3,541.47 crore in FY 2022-23 to ₹4,270.18 crore in FY 2023-24.
• EBITDA: Increased by 16.76% from ₹1,396.65 crore in FY 2022-23 to ₹1,630.68 crore in FY 2023-24.
• Profit Before Tax (PBT): Increased by 10.51% from ₹1,354.01 crore in FY 2022-23 to ₹1,496.28 crore in FY 2023-24.
• PAT: Increased by 10.48% from H1,005.88 crore in FY 2022-23, to 1,111.26.
• Net Worth: Increased by 30.32% from ₹2,478.40 crore in FY 2022-23 to ₹3,229.97 crore in FY 2023-24.
• Earnings Per Share (EPS): Increased from ₹12.57 in FY 2022-23 to ₹13.89 in FY 2023-24.
• **Market Capitalization:**Increased from H45,840 crore on March 31,2023 to H74,396 crore on March 31, 2024
• Revenue share Contributed to Ministry of Railways: Increased to H944.62 for FY 2023-24 compared to H704.90 crore from FY 2022-23.

Business Segment Performance #

• Catering: Revenue increased by 31.88%, from ₹1,476.49 crore in FY 2022-23 to ₹1,947.19 crore in FY 2023-24, contributing 45.60% to total revenue.
• Rail Neer: Revenue increased by 8.54%, from ₹300.97 crore in FY 2022-23 to ₹326.66 crore in FY 2023-24, contributing 7.65% to total revenue.
• Internet Ticketing: Revenue increased by 8.12%, from ₹1,198.03 crore in FY 2022-23 to ₹1,295.31 crore in FY 2023-24, contributing 30.33% to total revenue.
• Tourism: Revenue increased by 33.24%, from ₹412.21 crore in FY 2022-23 to ₹549.22 crore in FY 2023-24, contributing 16.42% to total revenue.
• State Teertha: Revenue decreased 1.29% from H153.78 Cr in FY 2022-23 to H151.80 Cr in FY 2023-24.

Major Strategic Initiatives and Their Progress #

• Catering: Implemented policy guidelines for awarding contracts under the ‘Clustering System’ to set up state-of-the-art kitchens. Partnered with food aggregators, crossing 1 lakh meals per day through e-catering.
• Rail Neer: Commissioned three new plants in Kota, Bhubaneswar, and Simhadri, increasing production capacity. Exploring the use of recycled PET bottles.
• Internet Ticketing: Enhanced the Next Generation e-Ticketing (NGeT) system. Implemented same-day refund initiation for failed online transactions.
• Tourism: Launched Bharat Gaurav Trains and saw operation of Aastha Special Trains
• Technology: Introduced IRCTC i-Pay and Ask DISHA Chatbot. Incorporated IRCTC Payments Limited as a wholly-owned subsidiary for the payment aggregator business.

Risk Landscape Changes #

• Regulatory Risk: Remains a significant factor due to the company’s close ties with the Ministry of Railways and potential policy changes.
• Competition Risk: Potential increase in competition if the market opens to private companies.
• Technology Risk: Dependence on technology for ticketing and catering services.
• Labor Risk: Related to dependency on contracted workers for operations.

ESG Initiatives and Metrics #

• Environmental: Waste management systems implemented for used Rail Neer bottles. Tree plantation drive conducted as part of environmental responsibility. Solar lights installed (310 units).
• Social: CSR expenditure of ₹16.64 crore, focusing on healthcare, sanitation, education, community development, and environment protection. Covered 10 aspirational districts under CSR.
• Governance: Adherence to Corporate Governance principles, with a focus on accountability, transparency, fairness, and responsibility.

Management Outlook #

• Focus on expanding catering and hospitality services, particularly through long-term cluster-based contracts.
• Plans to increase the approach towards accomodation services.
• Plans to expand the Rail Neer production capacity with new plants and upgrades.
• Enhancement of tourism offerings, including new packages and routes, with a focus on domestic and international travel.
• Continued investment in technology to improve user experience and operational efficiency.
• Anticipating robust growth in the railways sector, supported by significant capital expenditure and the introduction of new train services.

Detailed Analysis #

Financial Position Analysis of IRCTC #

3-Year Comparative Analysis (Consolidated) #

Assets #

Liabilities #

Equity #

Significant Changes in Major Line Items (>10% YoY) #

• Capital Work-in-Progress: Increased significantly from INR 3,379.07 lakhs in FY23 to INR 44,251.83 lakhs in FY24, representing ongoing investments in assets.
• Other Non-Current Assets:Decreased very significantly from 22,072.53 in FY23 to 1,925.97.
• Trade Receivables: Increased by 20.24% YoY, possibly due to increased sales or changes in credit terms.
• Cash and Cash Equivalents: Increased by 64.71% YoY, indicating improved liquidity.
• Other Current Assets: Increased by 12.03%, potentially due to higher prepaid expenses or other short-term assets.
• Other Equity: Increased by 32.42%, mainly due to retained earnings from profits.
• Trade Payables (MSME): Significant increase to 9274.74 representing the due amount to Micro, Small and medium Enterprise.
• Other Financial Liabilities (Current): Increased by 56.98%, this requires checking the notes for specific details on what constitutes these liabilities (e.g., short-term borrowings, accrued expenses).

Working Capital Trends #

The working capital trends can be analyzed using the current ratio:

Analysis #

• The current ratio has been relatively stable at around 1.82 to 1.95 during the periods, indicating a good ability to cover short-term liabilities with short-term assets.

Asset Quality Metrics #

Due to the nature of IRCTC’s business (service-oriented and a government enterprise), traditional asset quality metrics like Non-Performing Assets (NPAs) – common for banks – are not directly applicable. But one metric to consider is the allowance for Doubtful debts.

From the Annual Report (Note 10.1, Trade Receivables):

Analysis #

• There is a rise in impaired trade receivables between periods.

Debt Structure and Maturity Profile #

Based on the provided information, IRCTC’s debt primarily consists of lease liabilities.

Lease Liabilities (INR Lakhs) #

Analysis #

• IRCTC has a mix of short-term and long-term lease liabilities.

Off-Balance Sheet Items #

The main item to consider here is Contingent Liabilities. The report mentions a significant amount of INR 23,057.04 lakhs as contingent liabilities as on March 31, 2024 (Note 37.2). These represent potential obligations that are not yet recognized on the balance sheet but could have a material impact.

Industry Benchmark Comparisons #

Making direct comparisons is challenging without precise data on competitors in each segment. However, general observations can be made:

• Profitability: IRCTC’s profitability needs to be benchmarked against other catering, tourism, and online ticketing companies (if publicly available data exists).
• Current Ratio: A current ratio of close to 2 is generally considered healthy, but the ideal benchmark depends on the specific industry. Comparing this to other railway service providers or large e-commerce platforms would provide more context.
• Debt Levels: IRCTC’s debt primarily relates to lease liabilities. A comparison with other companies that have substantial lease obligations (e.g., airlines, retail chains) would be useful.

IRCTC Financial Analysis for FY 2023-24 #

Revenue Breakdown by Segment with Growth Rates #

• Catering: FY24 revenue was ₹1,947.19 crore, up 31.88% year-over-year from FY23 revenue of ₹1,476.49 crore.
• Rail Neer: FY24 revenue was ₹326.66 crore, an 8.54% increase from FY23 revenue of ₹300.97 crore.
• Internet Ticketing: FY24 revenue was ₹1,295.31 crore, showing growth of 8.12% from FY23’s ₹1,198.03 crore.
• Tourism: FY24 revenue was ₹549.22 crore, with a significant 33.24% increase compared to FY23’s ₹412.21 crore.
• State Teertha: FY24 revenue was ₹151.80, showing a -1.29% decrease as compared to FY23’s revenue of ₹153.78 crore.
• Total Revenue from operations grew by 20.58%.

Cost Structure Analysis #

• Cost of Materials Consumed: Decreased to ₹7,198.98 crore in FY24 from ₹7,567.38 crore in FY23.
• Employee benefit expenses rose to ₹28,904.81 crore from the previous year’s ₹24,552.41 crore.
• Other expenses amount to ₹16,077.15 crore for current FY and ₹15,017.17 crore for the previous FY.

Margin Analysis with Trends #

• Operating Margin: EBITDA margin was 36.77% in FY24 and 38.14% in FY23, indicating a slight decrease.
• Net Profit Margin: 26.02% in FY24, down from 28.4% in FY23.

Non-Recurring Items #

• Exceptional Items included a net expense of ₹(5,853.03) crore in FY24, significantly different from a gain of ₹2,720.00 crore in FY23.

EPS Analysis #

• Basic/Diluted EPS (Continuing Operations): FY24 saw an EPS of ₹13.89, increased from ₹12.57 in FY23.

IRCTC Financial Analysis (FY 2023-24) #

Cash Flow Analysis (Consolidated, INR Lakhs) #

Operating Cash Flow (OCF) #

• Profit before tax: 149,604.24
• Adjustments (non-cash items & working capital changes): -10,967.85
• Cash generated from operations: 132,996.10
• Income Tax Paid (Net): (44,778.77)
• Total OCF: 88,217.33

Investing Cash Flow (ICF) #

• Purchase of Property, Plant & Equipment, and Other Intangible Assets: (23,249.50)
• Proceeds from sales of PPE & other intangibles: 7.73
• Interest Received: 10,658.31
• Changes in Other Bank balances : (6,933.50)
• Capital advances Given: (710.85)
• Movement in TDRs: (-41.78)
• Rental income from Investment property: 234.98
• Total ICF: (20,034.61)

Financing Cash Flow (FCF) #

• Payment of principal portion of Lease Liability : (3827.31)
• Interest on lease liability : (606.05)
• Dividend Paid: (36,000.00)
• Total FCF: (40,433.36)

Working Capital Management Efficiency (Standalone) #

• Debtors’ Turnover Ratio (Days): 107.67 (FY 2023-24), increased from 88.38 days in FY 2022-23.
• Inventory Turnover (Days): 5.05 (FY 2023-24), slightly up from 4.46.
• Trade Payables Turnover Ratio: 2.53.

Dividend and Share Buyback Trends #

Dividend Payout #

• Interim Dividend Paid: INR 200 Crore (FY 2023-24), reduced from INR 280 Crore in the last FY.
• Final Dividend Recommended: INR 320 Crore (FY 2023-24), an increase from INR 160 Crore in the last FY.
• Total Dividend (FY 2023-24): INR 520 Crore (325% of paid-up share capital), representing 46.79% of PAT and 16.10% of Net Worth.

Share Buyback #

• No share buyback activity reported during the reviewed period.

Liquidity Position #

• Current Ratio: 1.95 (FY 2023-24, Standalone), a slight increase from 1.82 in FY 2022-23.
• Cash and Cash Equivalents: Increased to INR 70,633.87 Lakhs (FY 2023-24, Consolidated) from INR 42,884.51 Lakhs in FY 2022-23.

IRCTC Business Segment Performance Analysis (FY24) #

Revenue and Profitability Metrics with Growth Rates #

• Catering:

  • Revenue: ₹1,947.19 crore (FY24), ₹1,476.49 crore (FY23)
  • Growth Rate: 31.88% YoY
  • Segment Profit: ₹268.80 crore (FY24), ₹168.01 crore (FY23)
  • Segment Profit Growth Rate: 59.99%

• Rail Neer:

  • Revenue: ₹326.66 crore (FY24), ₹300.97 crore (FY23)
  • Growth Rate: 8.54% YoY
  • Segment Profit: ₹29.22 crore (FY24), ₹36.44 crore (FY23)
  • Segment Profit Growth Rate: -19.81%

• Internet Ticketing:

  • Revenue: ₹1,295.31 crore (FY24), ₹1,198.03 crore (FY23)
  • Growth Rate: 8.12% YoY
  • Segment Profit: ₹1,067.59 crore (FY24), ₹1,020.93 crore (FY23)
  • Segment Profit Growth Rate: 4.57%

• Tourism:

  • Revenue: ₹701.02 crore (FY24), ₹565.99 crore (FY23)
  • Growth Rate: 33.24% YoY
  • Segment Profit: ₹-19.14 crore (FY24), ₹16.45 crore (FY23)
  • Segment Profit Growth Rate: -216.35%

• State Teertha:

  • Revenue: ₹151.80 crore (FY24), ₹153.78 crore (FY23)
  • Growth Rate: -1.29%
  • Segment Profit: ₹29.43 crore (FY24), ₹28.79 crore (FY23)
  • Segment Profit Growth Rate: 2.22%

Market Share and Competitive Position #

• Internet Ticketing: IRCTC holds approximately 82.68% of total reserved tickets booked online on Indian Railways in FY24.
• Catering: Major player in mobile (over 1,200 trains) and static catering (hundreds of units).
• Rail Neer: Focus on 100% ownership of demand with a strategy to expand beyond railways.
• Tourism: Acts as the tourism arm of Indian Railways.

Key Products/Services Performance #

• Internet Ticketing: Average 12.38 lakh e-tickets booked per day through the Next Generation e-Ticketing (NGeT) system.
• Catering: Mobile catering services extended to 1265 trains. Partnerships with Zomato and Swiggy have contributed to e-catering service growth.
• Rail Neer: 19 operational plants produced 39.49 crore bottles in FY24.
• Tourism: Positive performance from Bharat Gaurav Trains, IRCTC Corporate Tejas Trains, Maharajas’ Express, and Domestic Air Packages.

Geographic Distribution and Market Penetration #

• Pan-India presence.
• Rail Neer production strategically distributed across 19 plants in India.
• Tourism services cover major pilgrimage and religious destinations across India and international destinations.

Operational Efficiency Metrics #

• Catering:
  • Conducted approximately 40,600 inspections of static catering trains and 11,840 onboard monitoring checks.
  • Dedicated staff for 100% of premium trains and sectional monitoring for mail/express trains.
  • CCTV monitoring enabled in 36 kitchens for real-time monitoring.
• E-catering:
  • More than 40,000 meals booked per day on average.
  • Partnered with food aggregators (Zomato, Swiggy).
  • Transaction value increased by 49%.

Growth Initiatives and Challenges #

• Growth Initiatives:

  • Catering: Implementation of “Clustering System” as per Railway Board.
  • Rail Neer: Commissioning of new plants, exploring recycled PET bottles.
  • Internet Ticketing: Introduction of features like same-day refund, integration with payment aggregators, and expansion of the “One India, One Ticket” initiative.
  • Tourism: Expansion in the MICE segment, operation of Aastha Special Trains, and exploration of new tour packages.

• Challenges:

  • Competition: Potential threat from new entrants in the travel sector.
  • Catering: Ministry of Railways mandated long-term (5+2 Years) cluster-based contracts.
  • Technology: Ensuring continuous upgrade and scalability of the e-ticketing platform.

IRCTC Segment-Wise Financial Risk Analysis #

Catering & Hospitality Segment #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Maintain continuous dialogue with the Ministry of Railways.
• Control Effectiveness: Moderate
• Potential Financial Impact: Revenue share to MoR was ₹944.62 crores in FY24, up from ₹704.90 crores in FY23.

Operational Risks #

• Severity: High
• Likelihood: High
• Trend: Increasing
• Mitigation Strategies: Over 40,600 inspections (FY24), onboard monitoring staff, CCTV in kitchens, QR codes on meals, and partnerships with food aggregators (Zomato, Swiggy) for e-catering.
• Control Effectiveness: Moderate
• Potential Financial Impact: Catering revenue increased by 31.88% YoY, reaching ₹1,947.19 crores in FY24. Profit before tax: ₹268.80 in FY2024.

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Online empanelment for vendors, cashless transaction emphasis.
• Control Effectiveness: Moderate

Compliance/Regulatory Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Compliance with FSSAI standards, regular food sampling and testing.
• Control Effectiveness: High
• Potential Financial Impact: ₹13,33,455 fine recovered due to malpractices detected during vigilance checks.

Emerging Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Development of new “State of Art” base kitchens.
• Control Effectiveness: To be determined
• Potential Financial Impact: Positive

Rail Neer Segment #

Strategic Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Diversification into non-rail-based markets.
• Control Effectiveness: Moderate

Operational Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Eight-stage purification process, automated plants, adherence to hygiene standards.
• Control Effectiveness: High
• Potential Financial Impact: Current production capacity is approximately 17.68 lakh liters/day.

Financial Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Capacity expansion through new plants.
• Control Effectiveness: Moderate
• Potential Financial Impact: Rail Neer contributed 7.65% to total revenue in FY24; ₹326.66 crores turnover.

Compliance/Regulatory Risks #

• Severity: High
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Compliance with EPR regulations, waste management systems.
• Control Effectiveness: High

Emerging Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Exploring recycled PET bottles.
• Control Effectiveness: To be determined.

Internet Ticketing Segment #

Strategic Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Continuous system upgrades (NGeT system).
• Control Effectiveness: High

Operational Risks #

• Severity: High
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: NGeT system upgrades, high-capacity data centers, AI-powered chatbot (AskDisha).
• Control Effectiveness: High
• Potential Financial Impact: 30.33% contribution to total revenue; average daily ticket sales of 12.38 lakh.

Financial Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Multiple payment gateways, IRCTC i-Pay.
• Control Effectiveness: High
• Potential Financial Impact: i-Pay generated ₹114.54 crores in FY24.

Compliance/Regulatory Risks #

• Severity: High
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Compliance with data security standards (PCI-DSS), cyber security audits.
• Control Effectiveness: High

Emerging Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Same-day refund implementation.
• Control Effectiveness: To be determined.

Travel and Tourism Segment #

Strategic Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Diversification into non-rail-based tourism products.
• Control Effectiveness: Moderate

Operational Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Operation of various rail-based tourism products, partnerships with state governments.
• Control Effectiveness: Moderate
• Potential Financial Impact: 16.42% contribution to total revenue; 15.59 lakh passengers availed tour packages.

Financial Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Decentralization of corporate travel business.
• Control Effectiveness: High

Compliance/Regulatory Risks #

• Severity: Medium
• Likelihood: Low
• Trend: Stable
• Mitigation Strategies: Compliance with LTC tour regulations.
• Control Effectiveness: High

Emerging Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Foraying into MICE segment.
• Control Effectiveness: To be determined.

IRCTC Strategic and Management Analysis #

Catering #

• Long-Term Strategic Goals and Progress: Enhance the quality of onboard catering through long-term, cluster-based contracts (5+2 years), with 129 of 196 clusters awarded in the first phase.
• Competitive Advantages and Market Positioning: Dominant position in railway catering, serving over 1,200 trains and managing 400+ static units. E-catering partnerships with Zomato and Swiggy.
• Innovation Initiatives and R&D Effectiveness: Implementation of AI-based CCTVs in kitchens to enhance food quality monitoring.
• Management’s Track Record in Execution: Successful onboarding of catering services for 51 pairs of Vande Bharat trains.
• Capital Allocation Strategy: Investment in upgrading kitchens (23 upgraded in FY 2023-24) and setting up new state-of-the-art kitchens.

Rail Neer #

• Long-Term Strategic Goals and Progress: Aim for 100% demand fulfillment within the Railways, with production capacity reaching 17.68 lakh liters/day across 19 plants and expansion planned.
• Competitive Advantages and Market Positioning: Exclusive packaged drinking water brand mandated at major railway stations.
• Innovation Initiatives and R&D Effectiveness: Focus on sustainable practices like 100% rainwater harvesting systems and energy-efficient equipment in new plants.
• Management’s Track Record in Execution: Commissioning of three new plants (Kota, Bhubaneswar, and Simhadri) in FY 2023-24.
• Capital Allocation Strategy: Focusing on capacity enhancement.

Internet Ticketing #

• Long-Term Strategic Goals and Progress: Expanding its e-ticketing platform to increase its dominance and streamline the ticketing process.
• Competitive Advantages and Market Positioning: Operates the largest e-commerce website in the Asia Pacific region, with 82.68% of online reserved tickets booked through its platform.
• Innovation Initiatives and R&D Effectiveness: The Next Generation E-Ticketing (NGeT) system has significantly increased per-minute booking capacity. The AI-powered AskDisha chatbot handled over 3 crore queries and booked 9.5 lakh tickets.
• Management’s Track Record in Execution: Continuous upgrades to the NGeT system, with record bookings of 28,434 tickets per minute, and high mobile app adoption (51.27% of online bookings).

Travel and Tourism #

• Long-Term Strategic Goals and Progress: Diversifying beyond rail-based tourism, expanding into air, hotel, and cruise packages, and targeting the MICE segment.
• Competitive Advantages and Market Positioning: Strong brand, particularly in rail-based tourism, and is exploring other tourism segments.
• Innovation Initiatives and R&D Effectiveness: Development of a dedicated bus portal (www.bus.irctc.co.in) and partnerships with state governments (e.g., Uttarakhand) for promoting regional tourism.
• Management’s Track Record in Execution: Introduction of Bharat Gaurav Trains, with 181 tours operated.

Organizational Changes #

• IRCTC was elevated to Schedule ‘A’ Public sector undertaking.
• IRCTC incorporated wholly owned subsidiary called IRCTC Payments Limited.

Capital Allocation Strategy #

• IRCTC is expanding the “Rail Neer” packaged drinking water with new plants.

ESG Framework and Sustainability Analysis #

Environmental Metrics and Targets #

• Total energy consumed from renewable sources increased from 679.24 GJ in FY 2022-23 to 1,630.44 GJ in FY 2023-24.
• Total energy consumed from non-renewable sources increased from 76,154.06 GJ in FY 2022-23 to 1,08,017.02 GJ in FY 2023-24.
• Total energy consumed from renewable and non-renewable sources increased from 76,833.30 GJ in FY 2022-23 to 1,09,647.46 GJ in FY 2023-24.
• Energy intensity per rupee of turnover increased from 0.22 in FY 2022-23 to 0.26 in FY 2023-24.
• Total water withdrawal decreased from 35,78,961.5 kiloliters in FY2022-23 to 737,518.27 kiloliters in FY2023-24.
• Water intensity per rupee of turnover decreased from 10.11 in FY 2022-23 to 1.49 in FY2023-24.
• Waste generated increased from 8,861.18 MT in FY 2022-23 to 10,234.99MT in FY 2023-24
• Waste intensity per rupee of turnover remained stable at 0.02.
• Three new Rail Neer plants commissioned in FY 2023-24 have 100% rain water harvesting systems.
• The Entity has begun exploring the use of recycled PET bottles.

Social Responsibility Programs #

• CSR expenditure for FY 2023-24 was J 16.64 crore, with a focus on healthcare, sanitation, education, community development, and environmental protection.
• CSR initiatives primarily targeted socially and economically deprived segments and aspirational districts.
• IRCTC operated educational tours for students, and cultural exchange tours under the ‘Ek Bharat Shresth Bharat’ scheme.
• The Company provided compassionate ground appointments and financial aid to families of deceased employees.
• The Company maintained a “War Room” for prompt handling of passenger complaints related to catering services.
• 3,66,430 CSR beneficiaries in FY24.

Governance Structure and Effectiveness #

• The Board of Directors comprises executive, non-executive, and independent directors.
• Committees of the Board include Audit, Nomination & Remuneration, Stakeholders Relationship/Grievance, CSR and SD, Risk Management, Strategic, Investment, Executive Board, Administrative, and Share Transfer Committees.
• Board and Committee meetings were held regularly, with attendance details provided.
• The Company has adopted a Code of Conduct and various policies related to ethics, transparency, and accountability.
• The composition of the Board of Directors did not comply with the provisions of the Companies Act, 2013, SEBI (LODR) Regulations, 2015, and DPE Guidelines on Corporate Governance due to an insufficient number of Independent Directors, including a Woman Independent Director. IRCTC is taking action to rectify this.
• The company has received ‘NIL’ comments from the CAG on Financial Statements for FY 2023-24 for the 4th consecutive year.

Sustainability Investments #

• The Company has invested in an exclusive War Room for complaints, feedback managment and new Rail Neer plants with enhanced environmental features.
• The company has upgraded 48 kitches with modern and mechanized kitchen equipments.
• The Company has made investments in new rail neer plants at Kota, Bhubaneswar, and Simhadri.

Regulatory Compliance and Future Preparations #

• The Company has complied with the Companies Act, 2013, SEBI (LODR) Regulations, 2015, and DPE Guidelines on Corporate Governance, except for the composition of the Board regarding Independent Directors.
• The Company has established a Vigil Mechanism and Whistle Blower Policy.
• IRCTC complies with Extended Producer Responsibility (EPR) regulations for plastic and packaging waste.
• The Company is implementing ISO 20400 for Sustainable Procurement.
• The Company has implemented a “same day refund” feature for online Rail E-Ticket transactions where the customer’s account has been debited and the ticket has not been booked.

Forward Outlook #

Catering & Hospitality #

Management Guidance and Assumptions #

Management assumes sustained growth momentum, driven by expansion in catering units (over 450) and train services (over 1200 trains, including 51 pairs of Vande Bharat trains).

Market Growth Forecasts #

The catering and hospitality segment is expected to grow, supported by the overall expansion of the Indian Railways sector and increased passenger traffic.

Planned Strategic Initiatives #

Implementation of long-term (5+2 Years) cluster-based contracts mandated by the Ministry of Railways to enhance quality in onboard catering services, including the setup of state-of-the-art kitchens. Integration with leading food aggregators (Zomato, Swiggy) and expansion of e-catering services.

Capital Expenditure Plans #

Setup of new “State of art” base kitchens, with the goal of creating quality food supply for passengers. upgrading existing kitchens, and setting up budget hotels.

Efficiency Improvement Targets #

Implementation of stringent quality control measures including regular inspections (over 40,600 inspections of static catering trains), onboard monitoring, centralized kitchen monitoring via CCTV, and use of POS machines to curb overcharging and ensure proper accounting.

Potential Challenges and Opportunities #

Challenges include maintaining consistent food quality and hygiene across a vast network. Opportunities include leveraging partnerships with online food delivery platforms and expanding the e-catering ecosystem.

Scenario Analysis #

• Best Case: Successful implementation of cluster-based contracts, significant increase in e-catering orders and improved hygiene increase passenger satisfaction, and higher revenue growth.
• Worst Case: Difficulties in maintaining food quality, operational disruptions due to external events or policy changes, slow customer adoption of new services, and revenue decline.

Sensitivity to Key Assumptions #

• Revenue is highly sensitive to the successful adoption and passenger satisfaction of the “State of Art Kitchen” and cluster-based contract models.

Rail Neer #

Management Guidance and Assumptions #

Management aims to meet 100% of the demand for packaged drinking water within the Railways, with an assumed increase in demand due to the resurgence of the tourism sector.

Market Growth Forecasts #

Demand for packaged drinking water is expected to increase due to greater emphasis on safe drinking water and growth in the tourism sector.

Planned Strategic Initiatives #

Expansion into the non-rail-based market, leveraging the brand’s reputation and increased production capacity.

Capital Expenditure Plans #

Commissioning of a new plant at Mallavalli, near Vijayawada (Andhra Pradesh) expected to increase daily capacity to approximately 18.40 lakh liters/day, from the current 17.68 lakh liters/day across nineteen plants. Capacity enhancement of Rail Neer Plant at Palur, Ambernath, and Danapur is under process.

Efficiency Improvement Targets #

Automation of manufacturing process with no manual handling of water, installation of solar power plants, rainwater harvesting systems and exploration of the use of recycled PET bottles.

Potential Challenges and Opportunities #

Challenge includes managing increased production and distribution efficiently. Opportunity includes diversification into the non-rail-based market.

Scenario Analysis #

• Best Case: The additional production capacity significantly increases market share.
• Worst Case: Inability to effectively manage the expanded supply chain resulting in reduced efficiency.

Sensitivity to Key Assumptions #

• Sales volume is sensitive to the commissioning of additional plant capacity.

Internet Ticketing #

Management Guidance and Assumptions #

IRCTC aims to leverage its position as the largest e-commerce website in the Asia Pacific region and continue innovating its e-ticketing system.

Market Growth Forecasts #

E-ticketing segment expected to show sustained revenue growth with an increase in transaction volume and daily logins (over 37.75 million transactions per month and 6.91 million logins per day in FY 2024).

Planned Strategic Initiatives #

Introduction of the e-Marketplace Bill Payments and Recharge Policy. Further development of the Ask DISHA Chatbot, and integration with DMRC for the “One India, One Ticket” initiative.

Capital Expenditure Plans #

Continued investment in the Next Generation E-Ticketing (NGeT) system to enhance per-minute ticket booking capacity.

Efficiency Improvement Targets #

Improvement in user experience with the NGeT system, streamlining the booking process and increase efficiency. Expediting the refund process and enhancing customer support.

Potential Challenges and Opportunities #

Challenges include managing peak booking loads and maintaining high system security. Opportunities are present in extending services to include bill payments, recharges, and further diversification into the fintech space through IRCTC Payments Limited.

Scenario Analysis #

• Best Case: Successful adoption of the NGeT system.
• Worst Case: Increased competition from new online travel booking platforms.

Sensitivity to Key Assumptions #

• Revenue is highly sensitive to the growth in internet and mobile penetration, as well as customer preference for online booking.

Travel and Tourism #

Management Guidance and Assumptions #

IRCTC aims to diversify and consolidate its business in the competitive tourism market, focusing on both rail-based and non-rail-based tourism products.

Market Growth Forecasts #

Tourism sector is expected to grow at a compound annual growth rate of approximately 5.1% from 2023-2033 (WTTC projection).

Planned Strategic Initiatives #

Launch of new packages based on heritage, culture, adventure, and special interest tours. Operation of Bharat Gaurav Trains and State Special tourist trains. Expansion into MICE (Meetings, Incentives, Conferences, and Exhibitions) segment.

Capital Expenditure Plans #

Investment in new rakes for Bharat Gaurav trains and potential partnerships to enhance tourism offerings.

Efficiency Improvement Targets #

Improved occupancy levels of IRCTC Corporate Tejas Trains and optimization of tourism portal for better user experience.

Potential Challenges and Opportunities #

Challenge includes managing competition in the tourism market. Opportunities in promoting domestic and international tour packages and developing new tourism circuits.

Scenario Analysis #

• Best Case: Increased demand and successful implementation of new partnerships and business models.
• Worst Case: Increased competition from other travel agencies and market disruptors.

Sensitivity to Key Assumptions #

• Revenue growth is sensitive to the success of marketing efforts and the appeal of new tour packages.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• The Independent Auditor’s Report issued a revised unmodified opinion on the standalone and consolidated financial statements, indicating compliance with Indian Accounting Standards (Ind AS) and other generally accepted accounting principles in India.
• The Auditor’s Report includes an “Emphasis of Matter” section referencing several items without modifying the opinion, including ongoing disputes, unconfirmed balances, profit-sharing adjustments, non-sharing of GST input tax credit data by certain vendors, and pending decisions from tax authorities.

Key Accounting Policies #

• Financial statements are prepared on a going concern basis and as per Indian Accounting Standards (Ind AS).
• Measurement basis is historical cost, with certain items like defined benefit plans and financial assets/liabilities measured at fair value.
• Revenue recognition follows a five-step model as per Ind AS 115.
• Depreciation is calculated using the straight-line method, with specific useful lives defined for various asset categories.
• Leases are recognized as right-of-use assets and corresponding liabilities.
• Provisions are recognized when a present obligation exists due to a past event, and a probable outflow of resources is required.

Internal Control Effectiveness #

• The Independent Auditor’s Report expresses an unmodified opinion on the adequacy and operating effectiveness of internal financial controls over financial reporting.
• Weaknesses noted:
  • Maker-checker concept is generally missing.
  • Manual controls instead of automated system-based controls.
  • Unreconciled differences in ledger balances.
  • Lack of robust balance confirmation processes.
  • Non-integration of some third-party applications with the ERP.
• Internal audit system is in place, coverage for Zonal, regional office, and plants are stated as needing improvements.

Regulatory Compliance Status #

• The Company complied with all relevant statutory requirements, including the Companies Act, 2013, SEBI (LODR) Regulations, 2015.
• Non-compliance with the composition of the Board of Directors with respect of independent directors and a woman independent director, per SEBI (LODR) and DPE guidelines.

Legal Proceedings and Potential Impact #

• Multiple legal proceedings and disputes are ongoing, including:
  • Arbitration awards related to catering contracts, with objections filed by IRCTC.
  • Notice from the National Anti-Profiteering Authority alleging non-passing of GST rate reduction benefits.
  • Disputes with Railways over profit-sharing on Rail Neer plants.
  • Various VAT, Service Tax, and GST demands under dispute.
• The financial impact of these proceedings is uncertain. Contingent liabilities have been disclosed where applicable.

Related Party Transactions #

• Transactions with related parties were conducted in the ordinary course of business and on an arm’s length basis.
• Significant related parties include the Ministry of Railways, Government of India, Royale Indian Rail Tours Limited (a joint venture), and IRCTC Payments Limited (Subsidiary).
• Transactions with Key Managerial Personnel include remuneration.
• A large volume of transactions occurs with the Ministry of Railways and government-related entities.

Subsequent Events #

• Share application money was invested into IRCTC Payments Limited, as on 31 March 2024 the amount was H1,500,00.00, and these shares were allotted on 8 April 2024.

Accounting Quality and Regulatory Risk Assessment #

• Several “Emphasis of Matter” paragraphs in the auditor’s report, combined with the lack of balance confirmations from Railways, suggest a need for further strengthening of procedures and system. Disputes and pending reconciliations represent financial uncertainties.
• The non-compliance related to the Board’s composition signifies a governance-related regulatory risk. Ongoing litigation and unresolved disputes with regulatory bodies represent a significant regulatory risk.