Balancing between monopoly and competition involves managing the trade-offs between market dominance and competitive forces.
A balance is usually preferred where fair competition exists, but in some cases (like public utilities or pharmaceuticals), some monopoly characteristics might be justified to support large investments and infrastructure.
Balancing monopoly and competition means regulating market power, so monopolies do not exploit consumers, while fostering enough competition to drive efficiency and innovation in the market.
One such company that has a monopoly is Indian Railways Catering and Tourism Corporation (IRCTC).
About IRCTC
IRCTC is a public sector undertaking under the railways ministry, established on 27 September 1999. It serves as the professional hospitality, ticketing, and travel arm of Indian Railways.
The company manages catering services on trains and at stations, provides online railway ticketing, and promotes domestic and international tourism through tour packages and budget hotels. It is also responsible for rail-bound tourism in India.
Its services and role encompass ticketing, catering, hospitality, and tourism promotion within the Indian Railways ecosystem, making rail travel in India more convenient and enjoyable for millions of passengers.
The company also sells bottled water. Rail Neer is the branded packaged drinking water marketed by IRCTC for passengers on Indian Railways.
Why IRCTC Has No Competition
IRCTC has no competition because it holds a government-granted monopoly over several key services related to Indian Railways.
These include the exclusive rights to sell railway tickets online, provide catering on trains and at stations, and distribute packaged drinking water on trains and at railway stations.
This monopoly means no other company is authorised to offer these services, forcing consumers to use IRCTC exclusively. This monopoly enables it to operate without worrying about competitors, particularly in online ticketing and catering.
While there are aggregator websites for train ticket bookings, they act only as partners using IRCTC’s systems, not real competitors, and customers are incentivised to book directly through IRCTC due to cost advantages.
The government’s full control and exclusive authorisation create barriers preventing competition from entering these markets.
Additionally, IRCTC faces competition only in its travel and tourism segment, which is outside the direct control of Indian Railways and where private companies operate freely.
Given that it caters to utility services, the lack of competition could be justified.
The lack of competition arises from:
- Exclusive legal authorisation by Indian Railways.
- Government ownership and control.
- Monopoly on ticketing, catering, and drinking water supply.
- Aggregators are partners, not competitors.
- Competition only in non-railway segments like travel packages.
A Look at Some Challenges that IRCTC Faces
Despite being a monopoly the company faces challenges. Let’s take a look at some of them…
- IRCTC’s business at the moment relies to a large extent on Indian Railways. Any policy change can impact the company’s revenues negatively. In the past catering policy changes did have an impact.
- Internet ticketing has already reached a saturation point with 80% penetration in the market. This leaves very limited room for growth for IRCTC in this segment, unless Indian railways expand its network dramatically.
- The company has a decent portfolio of tourism & hospitality products spanning land, rail, air and water-based tourism. IRCTC has a good level of penetration in mass tourism /religious tourism which is generally availed by senior age group. The problem for the company is that it lacks popularity with the younger demographics aged between 18 – 39 years of age.
- Though IRCTC has a diverse stream of business and has a multitude of offerings in tourism sector, it’s still positioned in people’s mind as rail-based company. The branding of the company is not effective enough to position it as a tourism company.
- It currently meets only 70% of the demand of packaged drinking water due to capacity constraints. The company is setting up more plants to fulfil this requirement first before exploring any other opportunity.
A Look at the Financials
IRCTC Financial Snapshot (FY21-25)
| ( ₹m, consolidated) | FY21 | FY22 | FY23 | FY24 | FY25 |
| Net Sales | 7,767 | 18,786 | 35,415 | 42,602 | 46,748 |
| Net Profit | 1,870 | 6,596 | 10,059 | 11,111 | 13,149 |
| Return on Equity (%) | 12.8 | 35.3 | 40.6 | 34.4 | 35.9 |
| Return on Capital Employed (%) | 18.3 | 47.9 | 55.3 | 46.9 | 48.4 |
Source: Equitymaster
The company has been reporting a good numbers over the last few years. The last 5-year average return on equity (ROE) has been 31.8%, while the average return on capital employed (ROCE) is a solid 43.4%.
For the quarter ending June 2025, IRCTC saw net sales of ₹1,159.7 crore ₹1,160 crore, against ₹1,117.6 crore in Q1 FY25. The net profit grew nearly 10% to ₹330.7 crore in Q1 FY26.
Overall, IRCTC reported stable and profitable performance in Q1 FY26 with growth in revenue, profit, and margins driven by ticketing and tourism segments. These results indicate strong fundamentals and strategic focus on growth and operational discipline.
What Next?
IRCTC has some strategies to counter the challenges that it faces. One of them is the better use of IPay, its online payment gateway which is currently used for in house products.
However, with the integration of IPay with other digital platforms it has the potential to open new source of fintech based revenue for the company.
IRCTC is also looking to use advertisement-based revenue from digital content streaming inside the train. There is a possibility of exploring advertising-based revenue integrating the ‘in-train’ digital entertainment experience for the passengers.
It’s privately operating trains in tourist & corporate circuits that can be used to earn advertisement-based revenue from digital streaming of the curated content. This should help bolster revenues for the company going forward.
One of the other strategies that has been highlighted by the company is the ordering of meals in train using QR code on berths. The idea would help a larger number of passengers scanning the code through mobile to order online food.
If implemented, the volume of online orders are likely to go up and these meals can be prepared in the base kitchen (in case order is directly placed to the base kitchen) or aggregated at the delivery hub (in case order is placed to an outside food vendor).
As far as tourism is concerned there have been thoughts of diversification of a hospitality product portfolio with alternate accommodation such as homestays & service apartments.
This is a niche segment of hospitality market which has been growing aggressively since last 5 to 7 years and especially after the pandemic.
This kind of accommodation is popular with youngsters and young families. The plan will expand the Indian Railways Catering and Tourism Corporation’s product mix in the hospitality segment and attract a new generation of users to IRCTC’s offerings.
Owing to the growing tourism in the country and prospects of the industry, the company aspires to create an asset of budget hotels on public-private partnership (PPP) mode across India catering to public tourism requirements.
All these are strategies that the company has outlined recently. One will have to wait and watch for approvals, though some may already have been initiated.
The company in a presentation last year said that the total revenue of should grow at a CAGR of 9.4% between FY24 and FY28 in a ‘business as usual’ scenario.
How shares of IRCTC have performed recently
Over the last one month, the share price of IRCTC has lost about 2% from ₹729 to ₹713. In the past one year, shares of the company have lost 24%.
The stock hit a 52-week high of ₹956.8 on 13 September 2024. The stock also hit a 52-week low of ₹655.7 on 3 March 2025.
Conclusion
IRCTC’s prospects appear promising with a strong growth trajectory in various segments. The company is expected to benefit from increased railway passenger volumes, expansion in tourism activities, and digital transformation.
It aims to leverage its large customer base and government backing to innovate and expand its service offerings in the coming years, making it a strong player in travel, tourism, and hospitality sectors linked to Indian Railways.
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Investors should evaluate the company’s fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.
Happy Investing.
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
