Indian Railway Catering & Tourism Corporation Limited (IRCTC) Earnings Call Transcript

Thanks for giving us opportunity to host the call. We have with us the management represented by Ms. Rajni Hasija, CMD; and Mr. Ajit Kumar, Director, Finance and CFO. I would now like to hand over the call for the management for some opening remarks, and then later, we can open the floor for Q&A. Thank you, and over to you, ma'am.

Very good evening to everyone. At the outset, let me congratulate all the investors that your company has done fairly well if the yearly results are to be seen, and we have also shown very good performance quarter-over-quarter. Not only quarter-over-quarter, but on the contrary, we have shown a very good performance, on the overall, the preceding year quarter also. The company has recorded the revenue of -- you might have seen the results by now. The overall turnover of the company has been to the tune of INR 3,541 crores as compared to INR 1,878 crores in the previous year. And our -- this is nearly 92% higher as compared to the previous year. And similarly, in the area of profit after tax, we have also closed with a very good numbers, where we have shown 52% improvement over the previous years. The quarter has been pretty happy for all of us, and we have shown tremendous improvement in few segments like tourism. And all 3 port segments have come out of the pressure from the COVID and all segments are doing well. You might have also noticed that there is a slight change in the EBIT margins because of the change in the revenue pattern. Now the Catering is contributing to 41% of the total revenue, whereas the Internet Ticketing is at 33% of the total revenue, where the margins are pretty high and then the margins are a little low. So that variation has been noticed by industry, which is taken well. However, the efforts to increase the margins are there, and it is a long-standing endeavor to be taken by IRCTC. With this, I close my opening remarks. However, I'll request you to start the Q&A session now. Thank you very much.

[Operator Instructions]

Am I audible?

Yes, yes, Mayank. So you are audible.

Congratulations on a good set of numbers in FY '23. Ma'am, if you could highlight some of the levers that we have at hand for expanding our margins segment-wise, that would help us a lot here.

Sure, sir. I will handle segment by segment. In the Catering fleet, our margins have been -- the contribution of the Catering in the profitability has been 12%. And our profitability margin has also been ranging from 10% to 12% always. That is what that overall segment has been designed in such a manner. Our focus will be more on the e-catering in addition to the privatization of our catering. Earlier, we had nearly 417 trains with the pantry car before COVID. Now we are nearly 497 trains after COVID, which are where we are providing services through pantry cars. And all these contracts have been awarded by IRCTC. You might -- the new train segment like Vande Bharat is also in the pipeline. All such new contracts are being offered. And IRCTC is in all readiness to award these contracts in time and do the operation even at a 1-day notice also. So this segment also has a line that, in the way of new trains coming in, in addition to the trains with the pantry car, we would be entering into more contracts with the train-side vending units. So far, we have completed nearly 700. For 97 trains, we would be entering into more contracts. This is a continuous nature work. Every month, we are entering into more and more contracts so as to provide catering services to the customer. In the field of Tourism, we have a new segment there. We are already there in the case of our budget tourism, luxury tourism, comfort tourism, economy tourism. In the field of budget tourism, we used to operate Bharat Darshan trains. These trains have now been replaced under [ A Pal ], changed by the scheme of government of India where Bharat Gaurav scheme has been initiated. In that scheme, we were operating nearly 80 to 90 trains in a year. But with this rate -- with these rates have been especially designed and going to operate on a theme-based circuit. Theme-based circuit like Guru Kripa, Ambedkar, Ramayana, Jan circuit, Krishna circuit, and you have Jyotirlinga circuit and many other religious circuits, we are going to operate these trains. And instead of now this 80 to 90 trains in a year, IRCTC, in turn, will be operating nearly 250 to 300 trains in a year. So earlier, we had a problem of a dedicated fleet, which was no longer. At times, that fleet was not available with us. Now we will have the availability of that fleet with us round the year. So that will not only have a very good brand equity, but will give a substantial amount of revenue in the Tourism segment. The luxury is doing very fine. All our -- in fact, for Golden Chariot also, we have started receiving a good number of a query. And Maharaja Express has done exceedingly well as compared to all the luxury trains of the country. We have recorded INR 55 crores of the turnover from the Maharaja Express alone. So in Tourism also, the brighter side of the day is that we are into all kinds of tourism. That is you call for the luxury tourism, inbound tourism, outbound tourism, where we take air packages to the other countries. As of now, we are producing only 15.58 lakh liter bottle a day. Now we would be producing nearly 70 lakh bottles, 16.27 -- 17 lakh liter bottles a day. Because 1 plant we have commissioned this year, that was Bhusawal was commissioned. Simhadri is in the pipeline. We are going to commission these both plants. Visakhapatnam, that is Simhadri, then Kota, then Vijayawada, and one more plant, we are going to operate that soon. In addition to adding new plants, we are also upgrading our existing plants so that within the same area of that, it was by -- I think by putting some small infrastructure, capital investment, we can increase the productivity and can earn fast revenue and is able to serve the demand of the market. That is in the Railway segment. And in the Internet Ticketing segment, our focus will not only be to serve the railway ticket customers, where we have already made a presence to the tune of 82%. We would now be serving -- providing the non-convenience e-resources, where we will try to upgrade those services and provide more and more services under this segment. So that EBITDA margins in this particular segment is nearly and a little more than what we have in the Internet Ticketing segment. So our focus is that because 82% we have already acquired, and the transition has been there. We are -- we will try to capture whatever best we can in the industry. Our revenue in the advertisement segment will also go up. And same is the -- our payment gateway will also go up. And the loyalty scheme, we are going to enter more and more agreements with the other banks so that our revenue in the loyalty card segment gets also a momentum.

And my second question was around specifically on Internet Ticketing space. So I had followed this stock earlier and back, I think, a year or 2 back, our promoter, Ministry of Railways, had some sort of sharing request. So what is the update on that now? How much are we sharing with the Railways?

That was -- Mr. Mayank, that was reverted in 9 August.

Yes, correctly, I remember right. So now what is the progress after that?

The status is that Ministry of Railways had authorized IRCTC to decide its convenience fee. Earlier, if you recall, it was in the name of a service charge. The service charge term was done away with. And we have started with the term convenience fee for the services that are being provided by the IRCTC as majority of the expenditure of the Internet Ticketing is being won by IRCTC. So IRCTC Board, our BOD has full power to decide that charges. No other agency has control over it.

Right, right. And so this event or threat cannot happen again, right, definitively?

It doesn't look like, and it has not been there since last 2.5 years have gone down the line, sir. After that episode, you might have not heard anything adverse.

You're right, right, right. Well, actually, that really spooked the investors. So I think -- I was just ensure -- trying to ensure that. Yes, someone else can carry on if someone else has a question.

Thank you, Mayank. If anybody else has a question, please go ahead.

So ma'am, I have a question in terms of -- can you please provide us a breakup of CapEx for upgrade of Internet Ticketing, upgrade of pantry car for FY '23 and future plans in terms of your CapEx?

It is going to be in the same tune. We generally target INR 80 crores to INR 100 crores for the Internet Ticketing. And we are also coming with the upgradation of 139 services being provided. It is going to be now on a CapEx model. So that service is also where we're going to provide the infrastructure in that. And the upgradation of the other services is happening. So it's a continuous process. So our expenditure is going to be in the same tune. And we would be upcoming with the -- completing our initial projects where we -- of the Rail Neer, where we have provided capital support of a INR 8 crores per plant that we would be completing this year. Then we are coming up with the new infrastructure in the -- our budget hotels, which are likely to be -- rather, we will start nurturing fruits soon in this financial year, where our -- one of the budget hotel is going to be commissioned this year. So more of a -- less of a capital, more of a return are foreseen this year. And the capital investment is going to be with the same tune, sir.

Okay. And ma'am, what is the status of your -- going to, there was some price tag that you are taking in, what, bottled water. So what is the status on that?

So far, the status quo is being maintained because the prices are administered by Ministry of Railways. We are handling other reasons. We are trying to improve the quality of the bottle also. We are working on the design. So let's see what happens comes out to be after discussion with Ministry of Railways in this regard.

And ma'am, in terms of your revenue expected from non-convenience fee, how much are you expecting in FY '24, '25 in terms of non-convenience fee? And if you could break that data...

Devangji, this year, we have been able to earn nearly INR 397 crores or INR 395 crores, INR 396 crores in comparison to INR 334 crores of the previous year. So there has been an incremental side. From the payment business, we are going to add nearly INR 50 crores this year. Because payment gateway business, we are already doing -- for aggregator, we need to have license, licenses in the pipeline. A few more commitments, a few more technical changes that we are undertaking at RN are likely to be committed -- completed. So there also, our revenue is going to increase, not only in the payment gateway, but on the aggregator side, if we are able to get the license this year. If we are able to move out of the Railways and put our business payment gateway aggregator business to the other streams, then the revenue is going to be more. So the things look, as of now, very rosy. And however, if you ask me the quantum exactly, I can tell you that from the payment gateway business, we have been able to get the commission of nearly INR 67 crores. And out of its net revenue to IRCTC has been nearly INR 40 crores [Foreign Language]. So that is an advantageous loan with the payment gateway. Aggregator is going to be more, maybe a double can be predicted from the aggregator model. And from the loyalty scheme, as of now, we have made live only 3 banks. 3 more banks we are in discussion with, we are going to live. So our revenue may not immediately double, but we are going to increase the same revenue. So this is from the loyalty scheme. And from the advertisement. Put together, all advertisement, all schemes have resulted into good revenue, INR 65 crores to INR 67 crores we have received this year from the advertisement. This is also going to mount because now the all policies have been streamlined and made more conducive to the industry. So we are likely to get good offers in this also. So you can say that things look good on the side of non-convenience fee resources also.

Thank you, ma'am. If anybody else has a question, please go ahead.

Yes. I had one question, ma'am. You had -- I think IRCTC had started the luxury pods or hotels business at the stations. So I think you have one at Mumbai Central also. What is the progress with that? How is it -- how is it progressing? And if you could give some numbers or the plans and strategy?

One pod we have in Mumbai, 1 pod we have got sanctioned in the end, and we have ones we took over the station from IRSDC. We are going to complete that project. Unfortunately, due to the shifting of the vendor, it got literally delayed, but likely to be commissioned soon this year. That is what I have been told by my team. So the second part will be coming in the end. And we had, in the other part, we are trying to get the spaces from Indian Railways. And once we commission, we'll let the industry know about it.

Okay. And ma'am, the ones which are open right now or about to, when did you open, actually? How is it? How is the traction over there? What is the response? Is it good?

Response is very good. It's very encouraging response. All the clouds are there. Good services are being offered by the service provider. We get very good feedback. On the license fee, of course, is for our -- for us, the license fee is going to be fixed only on the revenue. If it increased revenue sharing with a improvement either. But these things -- because if there's 1 unit, it doesn't make much more difference. But it is very impactful as well as the brand equity is concerned. It seems people don't have many questions today.

Ma'am, I have. I'll ask.

Let's hear from you then.

So when will the revised tariff of Catering materialize? What is the time line?

We have implemented the revised type. And in fact, you will be seeing once the assessment -- in terms of increase in the license fee, when the sales assessment is completed. In fact, we have completed part of that for Rajdhani, Shatabdi and fee patrons. We have completed that exercise in the peak period. For the lean period, we are yet to complete. While -- when we had completed the exercise for the peak period, we have issued the demand notices to our licensees. So they have raised certain objections. Certain queries have been raised. Those have -- all those queries have to be reconciled before the amount is realized by the IRCTC. These are the issues where unilateral decisions cannot be taken. We have done one exercise. That exercise has to be accepted by them also as per the policy. So we are bringing them at par with the decision taken by IRCTC gradually and slowly for the prepaid trains where the impact is more. And this exercise is likely to be completed for the Mail/Express trains in the coming future.

So what would be the incremental revenues and impact on margin because of this?

It is varying from train to train, Devang. It is -- like in 2 trains, it is as high as 20%. Where in 2 trains, it has gone on that down the line. But down the line, we are not going to accept because the quarterly -- the quarter license fee, we can't go beyond that -- below that, rather. So it is going to be on average. Maybe we had projected from 10% to 15% on the incremental side, we had projected. But if you run it, it is a little more. So we are going to have an actual-to-actual basis.

So will your margins still improve from your 10% to 12% range?

Yes. If that is the case, margins will improve, but at the same time, payable to Railway will also increase in the same spirit. So our margins will improve if this is implemented once the assessment is completed. That is the good part of this.

So any time line on that, ma'am? When will it be [ summing ] in?

It will be completed with another 3.5 months or so. Because after the summer period is over by June, the rainy season is considered as a lean period. My direct to catering services, we'll complete that very soon.

And ma'am, the capacity of the new plants, what would be and how much from -- how much more will you generate from the existing plants? What will be the capacity that you will get?

Like when we design each plant, each plant has a capacity to produce 72,000 bottles in a day. So now we are going to make it almost double because we are going to act double the machinery. And a few places where the capacity is more, the storage space is not there, we are going to provide them the storage space so that they can store water, and we can handle the requirement of the peak quarter. Water is a very different kind of a business. Either you have a very big requirement, or in the winter, you don't have much requirement. So water gets stored. And after 6 months, the water gets expired. So we have to be very careful so that we are not able to meet the demand of the industry. So we produce in line with the demand. That is what we have planned. That is why plant by plant, we have decided that from 72,000, we are going to initially make it 1.2 lakhs bottle a day. Likewise, we are going to upgrade the capacity, first 5 plants of ours. And then these PPP plants under our jurisdiction, we are going to handle that also. And by the way, recently cost audit, which has reported, which has come, it has -- we have a drastic improvement in the capacity utilization of all the plants. In the COVID period, it has gone down to the 40% because the water demand was not there. Who we were producing the water for? Now the demand has gone up. So we have been -- we have accepted the challenges of the industry and upgraded that thing, wherever possible, in a minimal time. And capacity utilization has improved to the extent of 73.5%. So -- and we are going to improve that also further within the existing resources by good operational methods.

This is [ Suresh ] so from IDBI Capital. Two questions from my side, ma'am. Yes. The first thing would be, ma'am, as per the filing in the exchange, there is going to be some transition in the Board for the new CMD thing. So any update on that side, ma'am?

See, I would be super innovating tomorrow. So why is CMD? One officer has been nominated to look after the work of CMD from 1st of June. Likewise, Director, Tourism Marketing also since I was holding the dual charge. New incumbent, they are older senior officers of the Railways who are quite conversant with the working of IRCTC, are going to look after temporarily. The selection for the CMD is in process, and we are likely to have a permanent CMD soon. And likewise, the DTM selection process has also been initiated. So you're going to have a permanent DTM soon. Till the time they are appointed, you are going to have experienced officers of the Railways who have been told to look after the contemporary basis. Talk, work and not stop. And moreover, systems with IRCTC are very, very strong. And the -- as we foresee, the team below are still the same. And our for -- field frontrunner are also the same. So the change in management does make a difference. But as far as the results are concerned, in the first quarter, which you foresee, I see all the good results coming up.

Ma'am, we will miss the experience of your Catering segment. Just the beginning of the Catering side and the prices are also going up.

I'm just a call away, sir. I'm just a call away because I was an old hand of IRCTC who has worked on each and every post. So I was -- today, I was recalling which posts I have not worked. So I could not count the post. I worked on each and every post. So I'm an old hand, so I'm always available a call away. I can always give my best thing. But the thing is that we have to accept. Once we come on the job now, our date of retirement is decided on the very same day. So you have to go, basically. But we are very happy with the support of our investors. I'm retiring with a very happy note, with the best ever results which we have -- IRCTC have delivered to the industry. So nothing more -- nothing better retirement gift can with this. I think I have been blessed with -- by Almighty, who has presented with this gift with the best results, which I've given to my investors. And come up -- the company has come up to your expectations.

I get it, ma'am. Ma'am, my next question would be with regards to the Ticketing business margins. We have seen a sharp jump in that margin also from 81 to 88. Where do we see it sustainable and going ahead from here?