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The recent decision by Indian Railways to reduce the advance reservation period for train tickets from 120 days to 60 days has sent ripples through the stock market, causing a significant drop in shares of the Indian Railway Catering and Tourism Corporation (IRCTC). This move, effective from November 1st, is being viewed as a negative development for IRCTC, a company heavily reliant on online bookings for its revenue stream.
IRCTC currently generates nearly 80-85 percent of its income through online bookings. The reduction in the advance reservation period is likely to impact this core revenue source, leading to a potential decrease in ticket sales and ultimately affecting the company's profitability. Analysts, in their assessment of the situation, have pointed out that the shorter booking window may result in a lower spread for IRCTC, further impacting its financial performance.
Despite the recent dip, IRCTC shares have witnessed a positive trajectory over the past year, experiencing an increase of around 22 percent. However, this upward trend appears to have been disrupted by the Indian Railways' decision. The stock market reacted swiftly to the news, with IRCTC shares experiencing a decline of 2.2 percent on the National Stock Exchange (NSE) compared to the previous session's closing price.
While the move impacts the majority of bookings, it is important to note that it does not affect trains with existing shorter advance reservation periods, such as the Taj Express and Gomti Express. Additionally, the advance booking limit for international tourists remains unchanged at 365 days. The railway board circular explicitly mentions that all existing bookings made under the 120-day Advance Reservation Period (ARP) prior to October 31st, excluding the day of departure, will remain valid and can be cancelled by passengers.
The recent drop in IRCTC shares serves as a reminder of the interconnectedness of the stock market with major policy decisions impacting industries. As IRCTC navigates the implications of the shortened reservation period, its future performance will be closely watched by investors and stakeholders alike.
Source: IRCTC shares tumble as Indian Railways cuts advance reservation period to 60 days