The Railway Ministry on Friday said that it has decided to withdraw the decision on the Indian Railway Catering and Tourism Corporation (IRCTC) convenience fee. This comes a day after IRCTC said it has been asked to share 50% of the revenue earned from bookings on its website as convenience fee. “Ministry of Railways has decided to withdraw the decision on IRCTC Convenience Fee,” the DIPAM Secretary announced in a tweet.
Let us tell you that after the stock split, the share of IRCTC, which climbed more than 10 percent on Thursday, came down 25 percent today. There were no buyers even at Rs 685.15 on the price of IRCTC share, but after a while the stock started seeing recovery. However, it is still trading at Rs 879.70 with a loss of Rs 33.80 (-3.70%).
Ministry of Railways has decided to withdraw the decision on IRCTC convenience fee pic.twitter.com/HXIRLxXTlL
— Secretary, DIPAM (@SecyDIPAM) October 29, 2021
Why did IRCTC shares fall?
The government has asked the online ticketing branch of Indian Railways to share half of its convenience fee from internet booking with it. IRCTC has been asked to share 50% of the revenue earned from booking on its website with the Ministry of Railways as convenience fee. This arrangement which was closed after the pandemic. After this news, the shares of IRCTC started falling.
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “The government has asked IRCTC to share 50% of the convenience fee with the Ministry of Railways. Increasing shareholder returns is not the objective of PSUs. Hence investors should be advised while investing in PSU stocks. Be careful. Stocks may be cheap.”
The share price of IRCTC rose by Rs 87.95 on Thursday. At the end of trading, it had closed with a gain of about 10.65 percent. After Stock Split, one share of the company is divided into five shares. This means that if you would have held 10 shares of it, then they become 50 shares. On Wednesday, the company’s shares had closed above 4100.
Shares of Indian Railway Catering and Tourism Corporation (IRCTC) as the stock is trading ex-split today. The record date for sub-division of equity shares of Rs 10 each into five equity shares of Rs 2 each has been fixed as Friday, October 29. While announcing its first quarter earnings, IRCTC had announced its stock split plans. The board had approved the proposal of 1:5 stock split.
Lower price will increase demand for stock
A stock split increases the number of shares outstanding by issuing more shares to existing shareholders. A stock split reduces the market value of individual shares, however, the market capitalization of the company does not change. Manoj Dalmiya, Founder & Director, Proficient Equities Ltd. said, “IRCTC stock looks technically sound as well as it is taking support near the previous breakout. Investors can buy the stock, because the lower price will make it look cheaper, hence increasing demand for the stock. “