Should you invest in IRCTC?

September 10, 2019
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Here’s the detailed analysis by Gopal Kavalireddi, Research Head at Fyers

I am not a top investor but more a common investor who has acquired an experience-oriented, unsavory distaste for public sector companies due to the central govt’s ability to suck the proverbial ‘juice’ in the form of dividends out of each PSU or engage in mutual buybacks to drain out cash. This doesn’t take into consideration the ineffective and inefficient management & boards that sit in these companies as senior management.

One look at the PSUs is enough to put me off from investing. Except for dividends they hold no real value. Investors also have to remember that dividend yields are obviously high as the share prices have gone nowhere over the last few years, some even in a decade.

Simple point: Govt needs money and it is cashing in on these PSUs as there is no money left anywhere. Slowly, the ability of these companies to pay dividends also will vanish.

Without capital appreciation, without dividends, what are these companies good for? Check the 10 year charts & see what appeals to you.

The ‘D’s that you see are the dividends of ONGC. Stripped of those dividends ONGC has given a capital appreciation of -34% in 10 yrs.

So, in short, I don’t invest in PSUs as I don’t believe in the govt’s ability to give them the space to operate freely & fairly, in an effective & efficient environment, with competent managements at the helm.

Instead of the PSU’s, I am happy to invest even at high prices of other good quality Cos. As I mentioned in my answer written a few days ago, I bought 100 shares of HDFC Bank, before stock split, at a price of 2253 and I am fine with it for the long term. I am sure, I can still make good money in capital appreciation as well as dividends from HDFC Bank.