Indian Railways has withdrawn its decision to seek a 50 percent share in revenue accumulated through the convenience fee charged by the Indian Railways Catering and Tourism Corporation (IRCTC), Department of Investment and Public Asset Management Secretary Tuhin Kanta Panday disclosed.
The announcement comes after shares of IRCTC fell as much as 29 percent to hit an intraday low of Rs. 650.10 on the BSE after the company informed the exchanges that the Railway Ministry asked it to divide the earned convenience fee revenue in a 50:50 ratio on October 28.
The sharing of revenue generated from convenience fees was to commence from November 1, IRCTC notified the exchanges in a filing.
Analysts estimated that IRCTC would lose 43 percent of its profits with the new arrangement. However, sources claimed that the arrangement of convenience fee-sharing between the Railway Ministry and IRCTC had been in place before the pandemic, and was made 100 percent for IRCTC only during the course of the pandemic.
The sharing arrangement began in 2014, split in a ratio of 80:20 between IRCTC and the Indian Railways. The ratio was adjusted to 50:50 in 2015 but the charge remained withdrawn for three years from November 2016.
Following the reveal of the sharing arrangement, shares of IRCTC dipped to lock at a 20 percent lower circuit. Sell orders of 3,933,837 shares were pending due to a lack of buyers.
On Thursday, October 28, IRCTC share price was also readjusted as the stock was split in the ratio of 1:5, sub-dividing the face value of the share from Rs. 10 per share to Rs. 2 per share. The move had led to a 20 percent spurt in its share price in the session prior to the announcement made by IRCTC regarding the government’s decisions.