India’s travel rush has a clear winner—and it’s not airlines

Social media has been a game-changer, making trip planning seamless, while mobile phones and high-speed internet have made navigating destinations easier than ever. But beyond technology, there’s also a fundamental shift in mindset—people now prioritise experiences and memories over material wealth.

So, how can investors tap into this booming trend?

Hotels, airlines, and travel aggregators may seem like obvious choices, but each comes with its own risks—capital-intensive hotels face supply challenges, airlines struggle with high investments, and travel aggregators battle fierce competition.

Amid these challenges, one company stands out with a near-monopoly in this space—IRCTC, the undisputed leader in India’s railway tourism and ticketing sector.

Also read: IRCTC stock: Why a monopoly business cannot be a ‘Buy’ at any price

The railway giant

IRCTC is the only entity authorised by the Indian Railways to provide online railway tickets, catering services to railways, and packaged drinking water at railway stations and trains in India.

Whether you book the ticket yourself or through an agent, IRCTC earns a share.

Beyond ticketing, the company has diversified revenue streams. It has partnered with Swiggy and Zomato, earning commissions on meals delivered to train passengers. In addition to convenience fees, it also generates income from advertising and marketing.

IRCTC plays a key role in railway tourism, offering curated packages for pilgrimages, corporate tours, and leisure travel. The launch of luxury trains and State Teerth Special Trains further strengthens its position in the segment.

Also read: Andy Mukherjee: India’s EV race with China may depend on high-speed trains

Moreover, ongoing investments in rail infrastructure and the increasing number of trains provide a long-term growth runway for the company.

It’s a position most businesses would envy.

While there are other monopolies, what makes IRCTC unique is the negative cash conversion cycle, and very low investments required as compared to the revenue and profits it generates.

A negative cash conversion cycle means a company gets paid by customers before it has to pay its suppliers.

Ever since it was listed, its operating profits have almost quadrupled. Barring Covid, a black swan event, its profits have grown every year. The business is almost debt free. The return ratios are north of 40%. The stock pays dividend too.

The company has applied for the in principal approval of the Reserve Bank of India (RBI) in December for the payment aggregator license. As per the management, a potential approval could open up huge opportunities for the company.

Risks on the horizon

Yet, IRCTC is not entirely risk-free.

In the online ticketing segment, its market share has largely plateaued. Future growth will depend on an increase in passenger volumes and train services. While a hike in convenience fees could boost revenue, it is subject to government regulations, making it an uncertain factor.

A bigger risk lies in potential regulatory changes—if the government restricts convenience fees or opens online ticket booking to private players, IRCTC’s monopoly could be challenged. As someone who has struggled with its ticketing platform, I believe competition in this space could be a game-changer.

Also read: Railways developing Vande Bharat parcel trains for e-commerce shipping

That said, if I were to pick a monopoly stock for a long-term watchlist—especially amid the current market correction (IRCTC is down 36% from its 52-week high)—this one would still be at the top.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com