IRCTC shares recover 39% after Railway Ministry reverses convenience fee decision

Shares of the Indian Railways' online ticketing service, Indian Railway Catering and Tourism Corporation (IRCTC), strongly recovered after the Ministry of Railways withdrew its decision to share IRCTC’s convenience fee. The Department of Investment and Public Asset Management tweeted that the Ministry of Railways has decided to reverse its decision on the IRCTC convenience fee.

Earlier during the day, the IRCTC shares had dipped by 29% and dropped to a low of Rs 650.10 on the BSE. This happened immediately after the Ministry of Railways announced that it has asked to share half of all the convenience fee revenue it earns.

IRCTC stocks recover by 39%

After the government issued another statement of reversing the decision, the IRCTC stock recovered by 33.98% and reached a high of Rs 906. IRCTC is a government-run firm and the only body to authorise the management of food services on trains and the online ticketing and catering system for the trains under the Indian Railways.

During the previous session, the value of the IRCTC shares increased by 20% after it started trading ex-stock split. IRCTC shares were also split in the ratio of 1:5, dividing the face value of the share from Rs 10 per share to Rs 2 per share. IRCTC board had decided the strategy to divide the stock price on August 12. As per the latest prices, IRCTC shares were trading at 3.97% lower than the peak of Rs 906 and currently stand at Rs 877.50.

What is the convenience fee?

The sharing of 50% of its revenue as convenience fee from bookings on its website with the Indian Railways had been discontinued when bookings were at an all-time low during the beginning of the pandemic. This convenience fee charged from customers was a huge part of the revenue generated for the IRCTC and the Railways. The fee is charged for the service of online ticket booking offered by the IRCTC and is not part of the ticket price.

The stock fell by 25% early on Friday after the news was released. IRCTC releases tenders for its catering services which are picked up by private companies, however, no other body can authorise the services inside the trains and the platforms.