Thanks, Janice. Good evening, everyone. On behalf of IDBI Capital, I welcome you all to IRCTC Q3 FY 2020 earnings call. From the management, we have Shri Mahendra Pratap Mall, Chairman and Managing Director of IRCTC, and Shri Ajai Srivastava, CFO and Group General Manager Finance. I would like to thank the management for giving us the opportunity to host the call and also congratulate them on a very strong performance in Q3 FY 2020. I would now request Mahendra sir to give a brief on the company's performance for the quarter. After that, we shall have the Q&A session. Over to you, sir.
Okay. Good evening, gentlemen and ladies. I'll request my CFO, Mr. Ajai Srivastava, to give you the brief, then I'll be ready for your questions.
Thank you, Mall. Good evening, everybody. We welcome you on to the con call of IRCTC Limited for the quarter and the nine months ending 31st December 2019. Yesterday, as you must be aware, the company has announced the unaudited financial results for the third quarter and the nine months ending FY 2020, and the same have been disclosed on both the stock exchanges also. I shall first talk about the Q3 FY 2020 results, post which we can have the question answer session. Let me first begin with the overview of the financial results. In Q3 FY 2020, the revenue from operations have been to the tune of INR 716 crores, which implies a growth of 39% on a QOQ basis and 65% on year-on-year basis.
The service charge on the e-tickets booked through IRCTC's platform, which was introduced with effect from 1st of September 2019, and which have been the main driver of growth in revenue in this quarter. The EBITDA margin for the quarter has been at 37.1%. That in this quarter has grown up by INR 206 crore, a growth of 106% QOQ and 180% year-on-year. Let me now move to the business segments of the company. The first being catering. This segment in Q3 FY20, the revenue for the segment was INR 169.2 crores, which implies a growth of 8.2% year-on-year, which is similar to that in Q2 FY20. The PBT margin was at 11.11%, and it is the same as was that in the previous quarter. It would grammatically appear that there is a year-on-year decline in the PBT margin.
This is primarily because prior to the listing, there were certain provisions which we made in the quarter four. Post-listing, we are including these provisions in the respective quarters, and because of this, these such changes are there. On a comparable basis, the EBIT margins are stable in year-on-year basis in this particular segment. In this quarter, the Indian Railways has also approved the revision of tariff for premium and non-premium trains, as well as the static units. Also, there has been a change in the menu, keeping in mind the customer preferences. The impact of these changes will come into effect in the coming months. While these changes will increase absolute revenue and profit from the sector, the company would target to maintain the margin and enhance the quality monitoring and control to enhance the customer experience.
Moving on to the next segment, that is internet ticketing. This Q3 FY 2020 saw full quarter impact of the service charge introduction on internet ticketing, which led to the revenue in this segment growing up by 94% on quarter-over-quarter basis. Income from service charge for Q3 FY 2020 was about INR 160 crore, with around 7.75 crore tickets being booked through IRCTC in this quarter. For the nine months in FY 2020, about 23.3 crore tickets have been booked through IRCTC. The revenue from service charge has been to the tune of INR 211 crore-INR 212 crore for the period ending December 2019. There has been also a good growth in the other revenue streams, which have contributed to the tune of INR 182 crore in the nine months, as against INR 146 crore for the entire year in the previous fiscal.
Moving on to the third segment, that is tourism. In Q3 FY 2020, the revenue has been at INR 161 crores, which is more than double on a quarter-over-quarter basis. Growth has been driven by both the tour packages business as well as the state fees business, which have picked up in this particular quarter. Moving on to the new trains that we have taken over. In this quarter, Lucknow-Delhi Tejas train was launched on 4th of October 2019 and operated for almost the full quarter and has gross revenue of around INR 15 crores. The Mumbai-Ahmedabad train has been launched in this quarter from 17th of January and is doing better than our expectations. We are also going to soon launch the Indore-Varanasi train. The commercial run of which shall begin from 20th of February. The next segment, that is Rail Neer.
This particular segment in quarter three FY 2020, the QOQ growth has been to the tune of 7%. In this quarter, we have also added two new plants at Bhopal and Jagiroad. We also intend to add two more plants in this quarter, which will be at Sumpel and Jabalpur. The current capacity with the operation of these plants is around 12.3 lakh liters per day. This shall increase to around 14.08 lakh liters per day when these other two plants also become operational by the end of FY 2020.
The board of directors of our company have also approved interim dividend of INR 10 per share. This is in line with the payout trend that has been followed in our company in the last three years. We can now move on to the question and answer session.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Sanjay Bembalkar from Dhanlaxmi Bank. Please go ahead.
Thank you for the opportunity and congratulations on the great set of numbers.
Thank you.
My first question is on the internet marketing vertical.
Yeah.
Can you please give some more color as to revenues, apart from convenience fees, which you mentioned. What is driving this growth in this piece of revenue?
Mainly our main revenue, which is almost 77%-78%, is from convenience fee of this segment.
In this segment also, still we are covering only 73% of total reserved tickets of Indian Railways.
Okay.
Still that gap of 27% is there. Of course, now with broad gauge, this is growing at a rate of about 2%-3%. That is number 1. In addition of more and more trains by Indian Railways, these are the two major things. Now we are concentrating more and more on monetization of our website. As you see, around 23%-24% income is from monetization of website, monetization of transaction charges, and some miscellaneous things. We are concentrating more on that also, advertisement on website. That is the scenario.
Sure. Great. Sir, secondly, my next question is on the catering vertical. You have taken menu price increases. What is the timeline for the menu price increases to reflect in our revenues? Do you have any timeline with respect to when we should see bump up in the revenues for that vertical?
In fact, you see, there are two types of trains. If you talk of trains, one is pre-paid trains, which are trains like where you pay for the food along with fare, that is Rajdhani, Shatabdi, Duronto type of trains. Second is normal, where you buy the meal. You see, our revenue will pump up from revision of the license fee of all these trains. License fee, we have to do this sale analysis. By whatever amount the sale has increased, license fee will increase accordingly. Right?
Right.
This has already taken effect from 19th of November. We have to do the sale assessment, and then accordingly, we'll revise the license fee retrospectively. This will come in from 19th of November. Coming to these prepaid trains, Rajdhani, Shatabdi, Duronto, since money for food is taken along with fare, there is advance reservation period of four months. Keeping that window, this will be effective from 28th of March.
Right.
Right. 28th of March, there'll be revised tariff also, and in this also, license fee will be revised in the same fashion.
Sure. Sir, what are the plans to upgrade the pantries? Any CapEx which is earmarked for this purpose and number of pantries, et cetera? This will also give us a bump up with respect to the sharing with railway will reduce.
Will reduce. Actually, we have put two consultants on the job. They have given the design, we have submitted it to Railways. It is to be cleared by Research Designs and Standards Organisation of Railways. They had raised one or two issues, which we have clarified. This should be cleared by them, maybe within next eight to 10 days. We will introduce this design in some of the new pantry.
Okay.
Once it is done in some production unit, we will apply this to existing pantry cars. The moment we apply, our revenue share will reduce from 40%- 15%. This will be rather for us, CapEx neutral, I can say.
Okay, great. Sir, the last question is on the Rail Neer segment.
Excuse me, sir. This is the operator.
Yeah.
Sorry to interrupt, but requesting you to please speak a bit louder.
Sure. Sir, my question is on the Rail Neer segment. I just wanted to understand what is the current utilization at overall Rail Neer segment for us?
See, I mean, Rail Neer, what happens whenever we set up a plant, there is a production issue and there is a logistics issue, distribution issue also. Whenever we set up a plant, normally for first year, we operate that plant at a capacity of 50%-60%. Second year, we increase it to around 80%. Third year onwards, we take it to full capacity. All those plants which are functioning today, which are more than two years old, are working at around 93%-94% capacity. Other plants, depending on the age they are functioning.
Okay, that's great. Thank you, sir. Thank you very much.
Thank you.
Thank you. Before we take the next question, I'd like to remind participants to please limit your question to the proper participant in the queue. If you have a follow-up. Next question is from the line of Sahil Gupta from Morgan Stanley, please go ahead.
Hi, good evening everyone. Congratulations for a successful IPO. Just have three questions. Firstly, on the internet fixing charges, you talked about INR 160 crore is the convenience fee on 7.65 crore tickets. That's roughly about INR 20-25 per ticket on average. Could you just give us some understanding of how should we think about this going forward? Can this increase or are these kinds of regulations from the Government, so no real possibility of an increase out there? Related question to charges that, how should we think about these convenience charges going forward? Is there anything from the Government that suggests that these will not be taken away, and hence, this is a revenue stream that will continue? That's the first question. The second question was, how should we think about your growth drivers going forward?
Within your current segments, which segments do you believe are going to still show significant growth? Are there any new business streams that can potentially come up, could potentially get monetized and add to your revenues? Those were my two questions. Thank you.
You have mixed four, five questions in two. Anyway, I'll answer.
They're all related.
Earlier this convenience fee on internet ticketing was INR 20 and INR 40 on non-sleeper and sleeper. This was shared with Ministry of Railways, 50/50. When it was reintroduced in September, we were given freedom to fix it, and there's no sharing with Railways. We put it as INR 15 and INR 30. No sharing with Railway. That is number 1. Along with this, to promote all these UPI, BHIM, and RuPay, any transaction on these instruments, we levy a charge of INR 10 and INR 20. Second thing you asked basically about upside of this. I don't see in near future we will increase it because ultimately we are a government company and it's a basically public service also. In any case, we are making profit, we should not be greedy. Increase in tariff, I don't see in near future, increase in volume, yes.
Still 27% segment of railway reserved ticket is on window. With the spread of internet and more and more smartphones and all that, this is gradually increasing by about 2%- 3% per year. That is one. Secondly, we are trying to monetize more and more our website by way of advertisement, transaction charges, and promotional mailers, promotional SMSs. That is our strategy for this segment.
Got it. Okay. How should we think about growth drivers going forward, within your current segments and any new segments that can come through?
See, currently as you know, four segments, IT, internet ticketing, I have already told you. Regarding catering, yes, tariff revision is one which will result in increase of revenue as well as profit. In addition to that, recently Government of India, Indian Railways had announced that pantry car will be added to more and more trains. Because there are still lot of long-distance trains which do not have pantry cars. With more and more pantry cars being added, that business will come to us. In addition to that, we are putting emphasis on e-catering, whereby sitting on your berth or seat, you can order a food. Which is also increasing. We have streamlined the system of train side vending. This is a service where there are no pantry cars in the train.
Somebody comes and takes the order and supplies the meal at next station. We are working on all these segments, all these sectors. I'm hopeful that this will grow. Coming to state tourism, if you talk, recently Delhi elections were held and manifesto of Aam Aadmi Party, which had a thumping majority. In their manifesto, they had mentioned that they will carry 10 lakh pilgrims, senior citizen of Delhi to various pilgrim sites. We are the only agency for them, rather we are the only agency, we carry in full. Last year we did business worth about INR 70 crore-INR 80 crore with Government of Delhi. With this kind of allotment, this segment is likely to get a major boost. Coming to new segments, as CFO mentioned, we have entered into operation of trains, which is a new thing.
We started with one train. We are hoping that this will break even by the end of year two. That was Lucknow-Delhi Tejas train. Performance is better than what we expected. Second train, which we introduced between Ahmedabad and Mumbai. Here occupancy and response is much better than what we expected. Now we are trying with third train, which will be a slightly different category of train. It'll be a pilgrim train between Varanasi and Indore, connecting three Jyotirlings. There is a huge demand of pilgrims in this catchment area of Eastern U.P. and Bihar who are likely to take this train. We will work on these three trains, consolidate for about two, three months, and then we will take for more trains and the new opportunity which Railway is coming, 150 trains with new kind of rolling stock in different sectors.
We will participate in that also.
Got it. This is very helpful. Thank you very much and all the best.
Thank you.
Thank you. We'll take the next question from the line of Rajiv Jha from JM Financial. Please go ahead.
Yeah. Hello, good evening, sir.
Good evening.
Congratulations on great quarter numbers.
Thank you.
Sir, I just want to know, you just spoke about the Tejas trains where you're running between Ahmedabad and Mumbai and then Lucknow and Delhi and you'll be breaking even in the second year, you're saying. Now the third one you're talking about Varanasi and Indore. Going ahead, how many more Tejas trains are in the pipeline or planned? How could we factor in what kind of growth rate we could be seeing in this segment area?
Initially, we were offered to run two trains and we selected the routes.
Right.
As I told you, we are expecting them to break even in by end of year 2. You'll be happy to know that the earlier train which is Lucknow-Delhi Tejas is nearing break-even in first quarter itself.
Okay.
We are highly encouraged with this. Ahmedabad-Mumbai is performing even better. You can see why it is much ahead of Lucknow Tejas. You can expect it to break even in the first quarter. Certainly this will break even in first quarter.
Okay.
We are a small organization of about 300, 400 executives. To run more and more trains, we need our own staff, so we have to go for a recruitment drive also.
Right.
We will consolidate on this. We will learn from the mistakes, whatever have happened, assimilate the success of these trains and then we'll go and operate more and more.
Okay.
That there's no short-term measure.
Right. sir, if you could just tell me certain cost dynamics. Suppose if you have to run a train from a route, what kind of costing is really needed and what kind of additional recruitment would you have to do for the same?
Our trains, operation of trains is managed by Railways.
Right.
I mean driver, guard, and all that and station staff, signaling staff, track maintenance is done by railways. For that we pay Indian Railways a haulage charge. There's a fixed formula as per which we pay them the haulage charges.
Okay.
Right. For other services on board, which is catering, security, housekeeping, selling of ticket checking, all this is on PPP mode.
Okay.
We engage one agency which does this. Yes, for every train, we need about five to six of our own staff for supervision. The moment we dilute this, it'll be uncontrollable.
Right, sir.
Correct.
Yeah. Thank you, sir.
Thank you.
Thank you. Next question is from the line of Sumit Jain from ASK Investment. Please go ahead.
Sir, congratulations on a good set of numbers.
Thank you.
You said 2% to 3% growth in the overall tickets that Indian Railways sell. The number of tickets.
There is 2%-3% growth in passenger segment. That is number 1.
Right. Second is passengers migrating from window booking to internet booking. That's another 2%-3%.
Correct. That's the way to look at it. That kind of growth that can happen steadily set once the next full year
Addition of these new trains.
Like three trains we are managing, that is a straightaway addition. Now Railway is opening sector for 150 more trains. Obviously any party which takes one sector for 10, 12 trains, they'll not set up their own website.
This 2%-3% growth will go higher?
Yeah.
In your estimate, what that number will go up to?
It's difficult to say because passenger movement dynamics is currently growth is only 2%-3%. Earlier it used to be 7%-8%. Depending on the situation of economy, movement also increases. I'm being conservative when I say 2%-3% in passenger growth and 2%-3% in migration from window to web.
Okay. The INR 225 crore, INR 150 crore from convenience fee, the remaining INR 65 crore.
Yeah
from monetization.
It's from advertisements on website and you see on our website there's a total transaction of almost INR 35,000 crore in a year. Right?
Now we are pitching into that also, a share of that, advertisement on website. We are using our database for sending promotional mailers, promotional SMSs, targeted marketing.
Sure.
Then we have a network of agents. We charge them annual maintenance fee. All this is on that count.
At what rate this piece can grow? What rate it has grown for nine months?
Nine months it has grown by about 12%-13%. Targeted marketing is one area where we are growing at about 12%-13%. Last year, our total revenue from this was INR 146 crore, INR 145 crore, roughly. You see, this year, within nine months, we have touched INR 177 crore. Of course, there is a lot of uncertainty because we are doing a lot of pilot projects. We exactly don't know what will succeed. So far, we have succeeded, and growth rate is appreciable.
Okay. In catering, like you mentioned, actually it kicks in for the trains, prepaid trains almost at the end of the year, that is March.
20th March, yeah.
What did you say? Off the shelf, it kicks in immediately, right?
Yeah.
For the company as a whole, IRCTC as a whole, if you are getting INR 100 from catering, both license and direct sales, because of the increase that you have in tariffs, on a blended basis, what that number will go up by next year? What percentage roughly it can go up by?
Realization of INR 100? Actually, we have to do a scale assessment of all the trains, then we have to work out the percentage. Then we have to correlate it with the price increase which has taken place.
No, but you already have the number of price increase that has happened in the menu, right?
The number of price increase is there, but sale volume, whether it has gone up or gone down, still we have to assess. In Rajdhani, Shatabdi prepaid trains, which I mentioned, now railways have given the option of opting out also. Passenger has the option of not taking meals and purchasing only travel packet. All that assessment we have to do, we should be doing it by March end.
Just last one question related with this is how much of the catering revenue for nine months is direct sales and how much is license and concession fee? When you charge concession fee to the person who's handling the catering, what percentage of this revenue you typically charge at IRCTC company level as a whole?
See, our turnover, that is sale potential in Rajdhani, Shatabdi, Duronto, for nine months it is about INR 430 crores. Right?
Okay.
This license and concession fee which we take, that is about INR 240 crores for first nine months.
This will certainly go up, but by what extent, we'll be able to tell only when we are able to do the sale assessment.
Right. Compared to only INR 670 crores, you've done a turnover of INR 708 crores nine months. You said INR 430 crores pre-booked.
This I told you about the mobile portion only. We have static units like Food Plaza, fast food units, refreshment room, Jan Aahar, central kitchen, base kitchen, e-catering, and all that is another INR 110 crore.
Okay. One last question was that of the monetization on your website, which you just quoted out in terms of targeted marketing, et cetera, the margins remain in line, which is about 80% overall. Would it remain in line with what you get with the service charges?
No, it depends. It's difficult to charge margin of 80% from your marketing activity and all, but it changes from product to product.
What would be the margin?
Yes, sir.
Like you see, advertisement on website, it has no cost.
Exactly. Yeah.
Their entire thing is margin. When we go for sending promotional SMSes, then margin is much less.
Okay.
Same happens in case of payment gateway and financial transaction charges, which we recover from the instruments. There is no cost as such. Whatever we get is margin only.
Yes. Understood. Thank you.
Thank you. Before we take the next question, I'd like to remind participants, please limit your questions to one per participant. You may stay on the question queue if you have a follow-up. Next question is from the line of Jinesh Gandhi from Kotak Securities. Please go ahead.
Thanks for the opportunity.
Thank you.
Thank you. Sir, I just want to know that on a sustainable basis, what can be the annual operating cost for running the internet ticketing business? In this quarter, we quoted an EBIT margin of 85%. I want to know whether this is sustainable or not.
This is sustainable. This internet ticketing has a peculiar feature that every five to six years you have to go for a major CapEx, which is almost INR 250 crore-INR 300 crore when you change over the entire system.
Okay.
After that, it is only annual maintenance contracts and annual support, internet leasing charges, software costs, that is it. Margin of 85%, what you are mentioning, yeah, it'll remain more or less same because the depreciation and all that is already provided in this. This will not see any major change also.
Okay. Is it nearby or I think we are still far away in the cycle?
No, it's nearby.
Okay.
By 2021, 2022, we'll do it.
Okay.
In any case, this changeover, it is not that overnight you buy a new server and port. This changeover itself is a two to three years exercise. We keep on doing something. Next year we'll start doing something. We'll do about 20%-30% of the work in 2021. Major work will be in 2021, 2022.
Okay. Secondly, does the service charge revenue have any receivable component from Railways or is it that when a customer-
Please speak little louder.
Does the service charge revenue have any receivable component from railways, or is it that when a customer books a ticket and pays the money to us, we keep our service charge component and hand over the ticket fare to railways? Basically, how does this transaction function?
Actually, we pay to railways in advance because railway earning is a central government earning.
When any central government earning has to go to Consolidated Fund of India first. Only any party can have charge on it. We maintain an advance with Railway in a rolling deposit. Against that rolling deposit, we purchase ticket on behalf of all the passengers who book it, and add on our service charge convenience fee on that.
Replenish the rolling deposit with Railways. You see, in true sense, our business cycle in internet ticketing is 48 hours. I'm sure there is no other business or no other product which has a business cycle of 48 hours. Maximum 72. We give the ticket and get back the money along with profit within 72 hours is the outer limit. Normally, we get within 48 hours. Unlike a construction company or any other company where it may be 48 months.
Okay. One last question. Post this tariff hike in mobile and static ticketing, I understand that the license fee income will rise, but does this income have any kind of cost attached to it apart from the railway share which we have to pay?
No. On the license fee, there are two major expenditures. One is railway share that we pay.
Second is our administrative cost.
Okay.
Railway share will obviously increase because it is a percentage function of the revenue. Our administrative cost will remain the same or maybe increase at the same pace with which the raw cost grows.
Okay. Loosely speaking, the increase in license fee is virtually a proxy for your EBIT. It will directly move down to your EBIT.
Yes. Largely.
Largely. Okay, sir. Thanks a lot.
Thank you.
Thank you. Before we take the next question, I'd like to thank our participants again. Please limit your questions to one per participant.
Can you just excuse me for one participant, Ajai? CFO will reply. In fact, I've got sore throat. Despite that, I am shouting. Just give me some relief. Next participant our CFO will address, then I'll come back.
Sure. Deep Voda from Nippon India, please go ahead.
Hi, Pratap. On a couple of numbers. Just want to understand, let's say, the periods which you were planning this train. What sort of revenue would you have clocked in, let's say, what sort of EBITDA would you have, just to get a sense for us on the period? Just to get a sense on that.
This Tejas train?
Yeah, the two trains which you have.
No. Actually, in this particular quarter we have operated only one train, that is Lucknow and Delhi Tejas. In this we have clocked a revenue of around INR 15 crores. Almost achieved breakeven. So far as the other train is concerned, it has been in operation only with effect from 17th of January.
Correct.
Far as the figures and the indications are, the occupancy level is quite an encouraging sign, and we hope that it will also be achieving its breakeven in this quarter itself.
Any update on the airline ticketing? How is that progressing? What is the roadmap there?
Airline ticketing has also picked up. We have received One second. Yeah. On an average, if we see for the nine-month period, it has been to the tune of 4,750 tickets we are booking on an average per day. Specifically, if we see it is in the October to December, it is more than 6,000 tickets per day. Prior to this fiscal, it was around 4,700. It has picked up significantly.
Great. Thanks for all those.
Thank you. Next question is from the line of Ashish Agarwal from Mutual Fund. Please go ahead.
Sir, thanks. Just wanted to get a sense, why are our receivables so high? Just wanted to get some sense on that.
Our receivables are largely from railways.
Okay.
More than 60% is receivables from railways in the sense that for all these prepaid trains, this Rajdhani, Shatabdi Pay to the licensee and we get that from railways.
Okay.
To overcome and it used to take about two to three months.
Okay.
To overcome this, we have worked out a MOU with Railways, whereby 80% of this payment will be paid to us on the day of journey.
Okay.
This will start from next financial year.
Okay.
At least INR 700 crores of services which we offer, 80% we will get on the day of service.
Okay.
For the balance, we will raise the bill and existing system will follow. It will come down.
Okay.
Coming to this year's outstanding, there were some budgetary issues with Railway Ministry and Home Ministry. It will be cleared in the month of April. For Home Ministry, we carry all these paramilitary staff for elections and all that.
Right.
There our receivable is about INR 100 crores.
Okay.
With the coming of April, we should get it.
Okay, got it. What would be the cash in our balance sheet as of December end?
INR 1,161.
Okay. INR 1,160 crores. Okay, sir. Thanks.
Thanks.
Thank you. Next question is from the line of Vishwas Karl from Kotak Bank. Please go ahead.
Yes, sir. Thank you for the opportunity. Sir, my question on the revenue per ticket. In the nine months it works out INR 9.06 and this quarter it is INR 21. Basically in the previous quarter, this INR 21 number should be sustainable number, right, sir?
About the INR 21 is sustainable because we are charging INR 15 and INR 30, and almost 85% of the tickets are in AC category.
Okay.
This INR 20, 21 is the average yield for this. I don't know where from you got this figure of INR 9. It is perhaps on account of the fact that in that quarter.
The service charge quarter.
-the service charge we had levied only for one month, that is September.
Yeah.
July and August were without any service charge.
Okay, sir. Understood. The second question on the occupancy level of the first two Tejas train. What is the occupancy level in terms of %, sir?
This Lucknow Tejas, it is around 65%.
Okay.
Ahmedabad is about 80%-85%.
80%-85%. Sir, can you explain the revenue model in this Tejas train? How we are generating revenue? Revenue model can you explain to us, sir?
See, these trains we have taken from railways.
Yeah.
On payment of lease charges. That is one outgo.
Right.
Second is we pay to Railways haulage charge. Haulage charge is payment to Railways on account of operation of the train, the engine of the train, driver of the train, guard of the train, entire track, signaling, station, fuel, everything is given by Railways. For that, we pay them a haulage charges.
Right.
These are the two major outgo and then some expenditure on account of staff which we engage. That is a minuscule portion of overall expenditure. Regarding revenue, we have full freedom of fixing the fare in these trains. Unlike railway, where it is administered price and only that much can be taken. We have introduced a concept of dynamic pricing, just like airlines. We get money from there, and money comes directly to us. That is a model. Out of that, we pay to our service provider who give catering services, who maintains the housekeeping, catering, security.
Thank you. Next question is from the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah, hi. Congrats on a very strong numbers. Hello?
Yeah. Thank you.
Yeah, sir. My first question is for the tourism business. We saw a jump of 83 or so QOQ. What is the contributing factor here? I think Tejas contributed INR 15 crore.
Yes, Tejas is one of the reasons. Tejas is one of the reason which has contributed. Second biggest reason is our luxury train that we run Rajdhani. It run only largely in winters. It generally starts in last week of September and operates till the end of March. That entire revenue, in previous quarter, there was no revenue from this luxury train, but this quarter was a busy season. That is number 2. Thirdly, you see, there's a pattern in India that there is a massive tourist movement in third quarter. Our tour packages and all that which we sell is accounted for in third quarter. Lastly, we got an order of INR 70 crores from Delhi Government for carrying of pilgrims to-- Sorry, that is a state period segment. There also you'll see a growth. There we took most of the passengers in third quarter.
Okay. In Tejas business, I think you said in a media interview the revenue was INR 15 crore for the quarter. Why we say this is a breakeven? I thought based on the base fare computation, the breakeven point must be much lower than this number.
Are you aware about the costings?
I think what we said during the IPO, that 17% utilization on base fare basis is what we should be able to achieve.
Yeah. 17% was conservative. Around 65%-66% is the figure which we have arrived at. We have done some cost re-engineering, and we are reaching at about 65%-66% occupancy for left out places. That is what I'm saying. Still I stick to that 17% with minor costing re-engineering, we have reached a figure of 66%, which we are achieving.
One question on the catering business. Last year, Q4, we saw a good jump in catering revenue, around 18%. Is there any seasonality in Q4 in this business that we can expect here also?
Last year, Q4, we were not listed company till last year. We were making all the provisions in the last quarter. This year, we are making provisions quarter to quarter. You must be seeing a drop in our margin in third quarter vis-a-vis last quarter. It will stabilize in the last quarter, in annual accounts.
The next question is from the line of Harsha from India Today. Please go ahead.
Yeah, thank you for the opportunity. Just want to get a sense. In your Rail Neer plants which you're expanding, what would be the order of approximate CapEx that will be required for that?
One Rail Neer plant, what is our model, that we buy the land from state government or any state agency, on a transparent bidding process, we select one experienced party in packaged drinking water manufacturing and distribution. Depending on the capacity of the plant, we make an assessment that what is the likely CapEx in that for setting up the plant. In the bidding document itself, we mentioned that this much money will be paid to you, which is being paid based on the progress of work. On average, a Rail Neer plant needs about an acre of land, and since we buy it from government or government agency, it's generally INR 2 crore-INR 3 crore maximum.
An average plant of about 6,000 cartons per day costs about INR 10-12 crores of CapEx, out of which 80% we give and 20% customer has to bear it.
Sir, can you say INR 12 crore?
Yeah.
Okay. This is like paid upfront or it's generally over the period of the construction of the plant?
It's over the construction of plant, construction link, and machinery supply link. Like out of INR 12 crore, there is construction worth about INR 3 crores, rest is machinery. Based on the supply of machinery, installation of machinery, commissioning of machinery, and progress of civil construction work, it's predefined in the bidding document.
Okay, thanks. That's helpful. Secondly, I think earlier in the call you had mentioned that you charge the convenience fee from customers for internet ticketing. I think you had mentioned something about if you pay through UPI or RuPay, you charge some additional INR 20 fee. Was that correct?
Not additional.
Okay.
It is like our normal charges are INR 15 for sleeper class and INR 30 for AC classes. For UPI, BHIM and RuPay, instead of INR 15, we charge INR 10, and instead of INR 30 for AC class, we charge INR 20. Less than normal.
Thank you. Next question is from the line of Akshit Naraini from the Naraini Investment. Please go ahead.
Hi. My first question is. Government decided to privatize 150 trains, and in that private companies like Tata and Adani also shown interest in this offer. How much trains we are expecting and what is the timeline to get those trains? Is there anything you want to add in?
They have just come out with RFP. We are also waiting for that. We have engaged consultant for entering into this segment and what should be the exact model, whether we should enter through SPV or JV. This business basically has two components. One is investor or rolling stock provider, second is operator. As on date in India, there is no other operator other than IRCTC. Right?
Yes.
We have to tie up with some manufacturer of rolling stock or some investor who can organize rolling stock for us. Obviously, he'll also come then, and he's putting major investment. What structure will be more suitable for JV, SPV? All that we are studying, and we'll certainly participate in that tender.
Okay. My second question, is the company going to construct two hotels, one in Lucknow and one in Gujarat at Kevadia? What is the expected return of this? Instead of managing the hotels, why are we doing construction and owning these hotels?
You see, Lucknow, if you take example, Lucknow, we had got a land for about INR 8 crores is the cost of land. We are constructing the shell only. Right. Furnishing and interior money is being spent by PPP partner. He is our partner for 25 years, within which he will pay, number one, this opportunity cost of money, which we say, Lucknow Hotel, we have put in a cost of INR 20 crores for construction of shell, which we'll pay him. Cost of land is about INR 8 crores. For this INR 28 crores, he will give us a fixed return of 10%, which we have worked out, that in any case he has to pay. Once he starts operation, he will share his revenue with us. It's a safe model.
Instead of keeping money in bank, we are creating an asset which is generating money more than banks as well as asset has been created. Same model we will follow for Khajuraho and Kevadia also.
Sure. Thank you. Next question is from the line of Rajesh Jha from [Lakshmi Misram]. Please go ahead.
Yeah. Sir, I have one question on ticketing business and one on the balance business. For ticketing business, if you could tell us what is the net working capital macro phase?
You see, as I mentioned, we have to maintain advance with railways. That is perhaps the only working capital required. On an average, we issue tickets worth about INR 70 crore per day. Average, I believe. Normally we get our money back into the bank in 48 hour, outer limit is 72 hours. We have to maintain a balance of about INR 210 crore, which is normal time. We also study what is the peak time for booking, because there are days when, especially festive days and holidays and all that, when we book tickets worth almost INR 200 crore per day. That we study in advance and accordingly pull in more money in our rolling deposit. Depending on the holidays, in any financial year, there are four or five occasions when banks are closed for three, four days.
Saturday, Sunday preceded or followed by holidays. We have to keep an extra provision.
Okay. Basically, sir, the year-end number will only be about INR 200 crore because that's March end number and there is no.
Depending. Like last year, what happened, 31st March was Sunday. There were three holidays.
Okay.
That is the peak time of booking.
Understood.
That is the peak time, Tatkal booking is at its highest.
Perfect.
We had to maintain a balance of almost INR 500 crores, INR 550.
INR 550. Correct.
Because the moment balance in this rolling deposit goes below INR 5 lakhs, ticketing automatically stops, and we cannot afford that situation.
My second question is on the non-ticketing business sum total. All your verticals put together based on your business plan that you have, what should be projected growth that we can see in sum total of these businesses? What will be your capital commitment there? What is the ROCE that you seek on that capital commitment? I'm okay if you give sum total of non-ticketing. I don't want it individually.
You see, being in hospitality, our CapEx requirement is not much except for this Internet ticketing which is spread over. Right? Coming to it, all other CapEx, as I said, our business cycle is very short. Normally, CapEx, if we are incurring something, then we start getting result out of it that within a year or two. Indian Railways, we make investment about INR 14 crore. It takes about 9-10 months for setting up a plant, and we start getting our return immediately after one year. Centric our upgradation, which we mentioned, it will take about 45 days for upgradation. The day we upgrade, our revenue share to Indian Railways will go down. That is the situation.
Thank you. Next question is from the line of-
Can we stop at six?
Sure. Take it.
Tushar Vora from MC Ventures. Please go ahead.
Thank you so much for the opportunity, and congratulations, sir, on an excellent set of numbers.
Thank you.
Sir, just a few points. There was a news article regarding some investment you are doing in Delhi, about INR 600 crore for a five-star hotel along with IRCTC. If you could just explain what would be IRCTC's role and say proposed investment in this, why are we looking at such a large number as spend?
There was a talk, but it is not relevant now.
Okay. We aren't doing anything of the sort, right?
No.
Okay. Along the lines of budget hotels proposed in Lucknow and couple of other places, we are also making these pods. I believe we've started one already in Mumbai.
In Mumbai, we have started with one. Yeah. Basically, we don't invest in that. Have traveled in railways, there's a concept of retiring rooms at the stations which are budget accommodation at the stations. This is primarily on PPP model. We get it from railways and fix it onto a partner who upgrades the retiring room, gives us a minimum committed license fee, and then he operates and manages it.
We would not be investing again on these. It would just be a pure revenue share.
Yeah.
Correct. Just how much would we be getting from retiring rooms, et cetera, right now and hopefully this number in three years as our target now?
I mean, our scheme is a comparatively much smaller business. Retiring room license fee which we get is about INR 3 crore-INR 4 crore only. Yes, this has resulted in a much improved service to passengers. If you see some of our retiring rooms, you can compare it to a 3-star hotel. At a very nominal price in stations like Katra, Jammu, then Madurai and Erode, all that. Lucknow, Gorakhpur. It's more of a passenger amenity.
Understood, sir. Sir, very quickly, the newer initiatives that we had highlighted in the budget document, payment gateway, wallet, et cetera. Can you just share some light on what are the initiatives which are around those?
Payment gateway, we have already started. We have done a pilot project with one firm. Normally we enter into this kind of agreement for one year, then we go for open bidding process. You see our revenue from iPay, which is our payment gateway. [Foreign language]?
INR 17 crore.
INR 17 crores. I mean, we have succeeded in this pilot.
As against 2.5 in the previous year.
In the previous year, it was INR 2.56. This year, first nine months, we have made about INR 18 crores.
Thank you. Next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Thank you very much for the opportunity. My first question revolves around your revenue now. This is the quarter where we have seen a full impact of basically higher revenue in terms of your entire extra service charges coming in. With this base as a INR 715 crores odd on a quarterly number, what sort of growth from this base is what we can envisage going forward?
If you collect, I have already replied this, because there is a growth in passenger. Currently, because of recession, this growth is about 2%-3% only, but it generally used to be 5%-6% in railway passenger segment, the growth was there. Still 7%-8% of reserved segment on web is unmet. People are still buying ticket from window.
Yes.
Gradually they are migrating to this, and that growth is also on about 2%-3 %. Addition of new trains, announcement of more and more private trains, these are basically the growth drivers.
I know, sir. I heard that. Basically, my question was more on the perspective of overall revenue growth because you're talking about other growth drivers as well, right?
We are doing lot of experimentations on our website. As I replied in the previous question, this payment gateway. The thing which we have been experimenting for last two years, and total revenue on payment gateway last year was INR 2.5 crore. This year in first nine months only, we have touched about INR 18 crore.
Right.
Now we have launched this payment gateway, then we have launched our own card also, iMudra. There we are likely to get this transaction charges also.
Right.
We are experimenting and lot of pilots are in pipeline. This I am mentioning is some of the successful pilots.
There are a few where we have not been successful, but we have not invested anything. It's a private partner who comes and invests and takes the risk.
Okay, fair enough. Fair. Understood. Sir, my second question revolves around your margin. Sir, can you comment on sustainability of 37% EBITDA margin that you reported this quarter and any scope for improvement over and above that because of your tariff revision you can catch during the year?
In ticketing? Overall?
Overall.
Overall, I mean, yeah, next one to two years, I don't see any problem because if you split catering, then revision of license fee is due. Railway, we are getting more and more plants commissioned. The plant which we commissioned last year will run at 60% this year.
Correct.
There's catering and these new trains which we are doing, it's showing good results.
Sir, what is the scope of improvement basically on this 37%?
Mr. Poddar, so sorry to interrupt. We are unable to hear you, sir.
Hello. Now it's better?
Yes. Thank you.
Sir, what is the scope of the improvement on this 37% we are kind of currently reporting?
Scope is unlimited, and we are making our best efforts.
Okay.
You should be happy with 37%.
Yeah. Obviously, sir. All the very best.
Thank you.
Thank you.
Thank you. The next question was supposed to be the last question.
There will be any question by your CFO, Mr. Ajai.
Sure, sir. That was the last question. I would now like to hand the conference over to Shri Mahendra Pratap Mall for closing comments. Over to you, sir.
Thank you.
Please go ahead, sir, with your closing remarks.
Thank you. Closing remarks, I think CFO will give.
I thank all the participants. If there are any queries still left, you can write into us and we'll be answering it if at all required.
We'll be written to bomb. That's anyway.
Yeah.
Thank you.
Thank you.