Is IRCTC a Good Long-Term Investment After Buying 150 Shares at Rs.870?

I recently purchased 150 shares of IRCTC at Rs.870 due to a recent market fall. Now, I am pondering whether it is wise to hold them until their value reaches Rs.1800 again or if they have already reached their maximum closing price of Rs.1356. This article aims to provide insight into the long-term investment potential of IRCTC by analyzing its financial health and suggesting a strategy for your current holding.

Understanding IRCTC's Business

IRCTC (Indian Railways Catering and Tourism Corporation) is engaged in various business activities, including data processing and hosting services. Additionally, the company operates web portals that cater to these services. This diversified business model positions IRCTC as a key player in the industry, offering a range of services that are in high demand.

Analyzing IRCTC's Financial Health

When evaluating whether to hold onto your IRCTC shares long-term, it is crucial to understand the company’s financial health. Let us go through some key financial metrics:

Market Cap: Rs. 47,400 Crore - This represents the total market value of IRCTC, indicating a substantial company size. P/E Ratio: 50 - The price-to-earnings (P/E) ratio suggests that the company is currently overvalued compared to the previous year. However, the stock is still considered expensive based on its own historical performance. ROE (Return on Equity): 35% - This high ratio indicates that IRCTC is generating substantial returns for its shareholders. ROCE (Return on Capital Employed): 44% - A high ROCE suggests that the company is efficiently utilizing its capital. Sales Growth: 140% - Significant growth in sales over the last year indicates a strong market position. Income Growth: 249% - This is a robust growth in the company's income, reflecting high profitability. Current Ratio: 1.87 - A good liquidity ratio suggests that the company can meet its short-term obligations. Promoters' Holding: 62% - High promoter ownership ensures that management has a vested interest in the company's success.

Conclusion

Based on the financial analysis, we can conclude that IRCTC is a very attractive investment in terms of its financial performance. Over the past few years, the company has consistently shown growth in its revenue and income. The various financial ratios, including ROE and ROCE, are also very appealing. The strongest positive for the company is its almost monopoly in the listed players, which reduces competitive pressure. Additionally, as a government-owned entity, it benefits from stable and predictable operations.

Current Share Price and Investment Strategy

Your current holding price of INR 900 is currently overvalued according to the P/E ratio of 50. While the P/E is still high in comparison to historical data, IRCTC is clearly a good business investment. If you are a long-term investor and believe in the company's future growth, you might consider averaging your investments by purchasing more shares as the price drops. Do this only if you are confident in your analysis and have a solid understanding of the business.

Given the recent scenarios, it is also advisable to monitor market trends and make adjustments to your strategy based on a combination of technical analysis and fundamental research. If you have a trading mindset, you might consider taking some profit off the table and reallocating those funds to other opportunities. Alternatively, if you are a long-term investor, fixing a certain amount for future investments could be a practical approach.

Final Thoughts

To conclude, IRCTC's financial health and long-term potential make it a strong candidate for a long-term investment. However, the current share price of Rs.900 is overvalued. Based on your strategy, you may consider either averaging your investments or taking profits and reallocating them. The decision depends on your risk tolerance and investment goals.

Further Resources

For further information and education on market and finance, please visit investing websites and resources that offer in-depth tutorials and analyses.

Thank you for considering this advice. Happy investing!