BENGALURU (Reuters) -Shares of Indian Railway Catering and Tourism Corp (IRCTC) pared most of their sharp early losses on Friday, as the government reversed its decision to take 50% share of the state-owned company's revenue from convenience fees.
IRCTC plunged as much as 30% in its sharpest intraday fall since listing in 2019, wiping off as much as 219 billion rupees ($2.93 billion) from its market valuation, after the Ministry of Railways asked it on Thursday to share 50% of revenue earned from convenience fees from Nov. 1.
But the stock pared most of these losses after the Indian government withdrew its decision earlier this morning.
"Ministry of Railways has decided to withdraw the decision on IRCTC convenience fee," the secretary of India's Department of Investment and Public Asset Management said in a tweet https://twitter.com/SecyDIPAM/status/1453958990606393346.
IRCTC, the only firm authorised by the Indian Railways to manage food services on trains and offer online railway ticket booking services, earns a sizeable chunk of its revenues from convenience fee.
The company earned about 2.99 billion rupees from convenience fees in 2020-21 or around 38% its revenue from operations, according to its annual report, in a year marred by COVID-19's hit to travel.
"This incident reveals the risks that investing in public sector enterprises carry," said Shriram Subramanian, managing director at corporate governance advisory firm InGovern Research Services.
"All government ministries should realise not to rock the applecart as valuations of most PSEs are already very depressed and the disinvestment programs, like the LIC IPO, could get impacted."
($1 = 74.8100 Indian rupees)
(Reporting by Vishwadha Chander in Bengaluru; Editing by Rashmi Aich)