IRCTC Business Model: How does IRCTC Earn Money?

The Indian Railway Catering and Tourism Corporation (IRCTC), established in 1999, is a subsidiary of the Indian Railways. It has evolved into a multifaceted entity, diversifying its operations beyond its initial mandate. IRCTC’s business model encompasses several revenue streams, each contributing to its financial health and growth.

Internet Ticketing

IRCTC is the exclusive entity authorized to offer online railway ticket bookings in India. This monopoly positions internet ticketing as a significant revenue generator. The corporation earns through convenience fees charged per booking, which vary based on the class of travel and ticket type. For instance, as of the latest data, the convenience fee for AC classes is higher than that for non-AC classes. In the fiscal year 2021-22, internet ticketing contributed approximately 54% to IRCTC’s total revenue.

The adoption of the Next Generation E-Ticketing (NGeT) system has enhanced booking capacities, allowing the platform to handle over 26,000 tickets per minute. This capability ensures a seamless booking experience for users, further solidifying IRCTC’s dominance in the online ticketing space.

Catering Services

Catering is another vital component of IRCTC’s business model, accounting for about 27% of its revenue in FY 2021-22.

The corporation manages both static and mobile catering services:

• Static Catering: This includes the operation of food plazas, fast food units, and refreshment rooms at railway stations.
• Mobile Catering: IRCTC provides onboard catering services across various trains, including prestigious ones like Rajdhani, Shatabdi, and Duronto.

Additionally, the introduction of e-catering services allows passengers to order meals from partner restaurants, enhancing the variety and quality of food options available during travel. This service has been well-received, contributing to increased customer satisfaction and additional revenue streams.

Packaged Drinking Water (Rail Neer)

To ensure the availability of safe drinking water, IRCTC launched its branded packaged water, Rail Neer. Produced in state-of-the-art plants, Rail Neer is supplied across trains and railway stations nationwide. In FY 2021-22, the Rail Neer segment contributed approximately ₹172 crore to IRCTC’s revenue.

The corporation continues to expand its production capacity to meet growing demand, thereby enhancing its revenue from this segment.

Tourism Services

Leveraging India’s rich cultural heritage, IRCTC has ventured into tourism, offering a range of services:

• Domestic and International Tour Packages: Customized packages catering to various customer segments.
• Luxury Train Journeys: Operations of trains like the Maharajas’ Express and the Golden Chariot provide premium experiences to travelers.
• Pilgrimage Tours: Special packages to religious destinations across India.

In FY 2021-22, tourism services contributed around 14.8% to IRCTC’s total revenue.

The corporation’s focus on diverse offerings in the tourism sector has opened additional revenue streams and enhanced its brand presence in the travel industry.

Advertising and Digital Revenue

With a high-traffic website and mobile application, IRCTC capitalizes on advertising opportunities. Companies pay to display ads on IRCTC’s platforms, providing a steady stream of ancillary revenue. Additionally, IRCTC has developed its own digital payment gateway, I-Pay, which is used across its services. Plans are underway to extend I-Pay to external markets, aiming to generate fintech-based revenue beyond internal streams.

State Teertha

Under the State Teertha segment, IRCTC collaborates with state governments to operate pilgrimage trains. While this segment faced challenges during the COVID-19 pandemic due to travel restrictions, it remains a part of IRCTC’s diversified service offerings.

Financial Performance and Growth Prospects

IRCTC has demonstrated robust financial performance over the years. In FY 2021-22, the corporation reported a total revenue of ₹2,497 crore, marking a significant increase from ₹1,185 crore in the previous fiscal year. The net profit for the same period stood at ₹664 crore, reflecting a strong recovery post-pandemic.

The corporation’s diversified revenue streams, coupled with its strategic initiatives in digital services and tourism, position it well for sustained growth. As the travel and tourism sector continues to recover, IRCTC’s comprehensive service offerings are expected to drive further revenue enhancement.

Challenges and Considerations

Despite its strengths, IRCTC faces challenges such as regulatory changes, competition from other online travel agencies, and the need to continuously upgrade technology to handle increasing user demand. Additionally, external factors like pandemics or economic downturns can impact travel behavior, affecting IRCTC’s revenue streams.

Conclusion

IRCTC’s business model exemplifies a successful integration of technology and service diversification within the public sector. By leveraging its unique position in India’s railway network, the corporation has established multiple revenue streams, ensuring financial stability and growth. As it continues to innovate and expand its services, IRCTC remains a pivotal player in India’s transportation and tourism landscape.