IRCTC Share Price in Focus as Rising Vande Bharat Revenue Weighs on Catering Margins

IRCTC share price is likely to remain on investors' radar after the company revealed that growing revenue from Vande Bharat and other premium train services is increasing GST-related costs in its catering business, impacting margins despite strong revenue growth.

The comments came during the company's post-earnings interaction with analysts, who sought clarification on the decline in catering profitability during the March quarter. While catering revenue grew at a healthy pace, higher tax costs and additional expenses weighed on the segment's margins.

IRCTC Share Price Watch: Catering Revenue Surges 27% in Q4

Indian Railway Catering and Tourism Corporation (IRCTC) reported a 26.8% year-on-year increase in catering revenue to ₹671 crore in the fourth quarter. The growth was driven by rising passenger traffic and the increasing number of premium trains, including Vande Bharat services.

However, the strong revenue performance was not reflected in margins. During the earnings call, IRCTC Chairman and Managing Director Sanjay Kumar Jain clarified that the company continues to earn healthy returns from Vande Bharat trains, but the structure of catering revenue brings additional costs.

GST Costs Impact Profitability

According to the management, IRCTC earns licence fees from catering operators while also accounting for catering revenue collected through train fares. As revenue from train catering increases, the company must bear a 5% GST component without receiving input tax credit.

The company estimated that higher sales from premium train services resulted in approximately ₹3 crore of additional GST-related costs during the quarter.

This means that while premium trains are helping drive top-line growth, the associated tax burden is limiting the improvement in catering margins.

Other Factors Behind Margin Pressure

Apart from GST expenses, IRCTC highlighted several one-off and operational factors that affected profitability.

Expected credit loss provisions in the catering segment rose to ₹16 crore from ₹5 crore a year ago, while CSR expenditure increased to ₹5 crore from ₹1 crore. The company also did not receive a one-time legacy income of around ₹33 crore that had boosted earnings in the corresponding quarter of the previous year.

Despite these challenges, IRCTC expects catering revenue to grow by nearly 15% annually, supported by the expansion of train services and growing passenger demand.

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Conclusion

For investors with a demat account tracking IRCTC share price, the latest update underscores the trade-off between revenue growth and profitability. While Vande Bharat and other premium trains continue to boost catering revenue, GST-related costs and higher operating expenses are weighing on margins. 

Nevertheless, IRCTC remains optimistic about the long-term growth potential of its catering business, making future margin trends a key factor to watch.

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