IRCTC share price: This IRCTC stock split won’t impact company valuations but it would become easy for small investors to invest in IRCTC stocks. Indian Railway Catering and Tourism Corporation (IRCTC) has announced a stock split that will divide its shares into five equity shares.
The Indian Railway Catering and Tourism Corporation (IRCTC) management announced a 1:5 split of IRCTC shares while reporting its Q1 FY2021-22 results. If the clearance is granted by the Ministry of Railways and existing shareholders, the face value of an IRCTC equity share will be reduced to $2 from the current $10. Similarly, IRCTC stock price would come down at around ₹500 to ₹550 from existing ₹2666 share levels.
Stock split to attract small investors
This sub-division of IRCTC shares, according to experts, will have no impact on corporate valuations, but it will make it easier for small investors to buy in IRCTC equities following the split. Small investors should take advantage of the IRCTC stock split and include this counter in their portfolio, according to them.
The PSU firm stated that it chose to split the stock to comply with the Department of Investment and Public Asset Management (DIPAM) of the Ministry of Finance’s instructions on capital restructuring of Central Public Sector Enterprises. IRCTC also intends to increase capital market liquidity in order to expand its shareholder base and make shares more accessible to small 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 Financial Express Online. He added that the move will make IRCTC stock easily accessible for retail investors, who now make up nearly 45% of the market participants. “The announcement is a positive move and (will) encourage retail investors to participate,” he added.
The share split will raise the number of IRCTC shares from 25,00,00,000 Rs 10 face value equity shares to 125,00,00,000 Rs 2 face value equity shares. IRCTC’s stock has increased by 84 percent so far this year. According to Vishal Wagh, Head of Research at Bonanza Portfolio, “a stock split increases involvement in the stock and results in buying after the split.”
Should you Buy ?
Since its IPO in October 2019, IRCTC has helped investors earn good profits. Because it operates in a monopolistic market, IRCTC has significant advantages that attract investors. “In plain terms, IRCTC is a platform company that has a monopoly in the passenger train booking sector. It is a B2C business with a healthy cash flow. As a result, this company is a buy-on-dip candidate,” Ashish Chaturmohta said.
Vishal Wagh, on the other hand, sees IRCTC as a stock to avoid on a technical level. “If the stock does not break the Rs 2,750 barrier at the earliest opportunity, the uptrend in IRCTC would be halted. The price might fall to Rs 2,300 per share on the downside,” he noted. Investors should liquidate the stock while it is trading below Rs 2,750, rather than waiting for the split to take effect, according to Vishal Wagh.
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