State-owned Indian Railway Catering and Tourism Corp. (IRCTC) made a stellar debut on the bourses on Monday with shares of the company doubling over its issue price on listing.

IRCTC’s share price closed at ₹728.60 per share at the close of trade on the BSE on Monday, up 127.69% from its issue price. This gave the public sector company a market capitalisation of ₹11,658 crore. The benchmark S&P BSE Sensex closed 0.23% higher at 38,214.47 points.

“We were expecting a good response from investors but this is beyond our expectations. We are confident we will deliver better revenue and margins in the coming quarters,” said Mahendra Pratap Mall, chairman and managing director, IRCTC, in an interview with Fortune India.

IRCTC is the only company that is permitted to provide catering services, online tickets, and packaged drinking water at railway stations and on trains in India. Analysts say this monopoly coupled with the company’s sound financials helped make the initial public offering a huge hit with investors.

“The pricing left money on the table for investors. We believe the stock valuation is sustainable and recommend investors to hold the shares with a one-year horizon,” said Abhimanyu Sofat, head of research, IIFL Securities. Sofat added that IRCTC’s move to introduce a convenience fee on tickets will be a game changer that could bring in ₹300 crore as incremental revenue.

IRCTC’s management says it is working on new strategies to accelerate the growth momentum. “The convenience fee, along with new train routes, and steps to rationalise catering costs will allow us to deliver better margins,” Mall said.

Catering services and fees contribute roughly 53% to IRCTC’s revenue pie. In FY19, revenue from operations was ₹1,868 crore; EBITDA (earnings before interest, tax, depreciation, and amortisation) margin was 19.9% and net profit ₹273 crore.

However, some experts believe a change in ticket pricing could put a spoke in IRCTC’s wheel. There are other challenges, too. Foremost is the policy uncertainty on the privatisation of train routes and catering services. The narrowing gap between air and train fares is also a concern. Arun Mantri, technical and derivative analyst at Karvy Stock Broking, said that retail investors need to be cautious.

“IRCTC has a monopoly and a robust business, but at the current market price the stock is overvalued and we recommend small investors book profits,” noted Mantri, adding, “The listing euphoria will continue for the next two to three days, but I expect a correction over the next couple of months, and there could be a buying opportunity at ₹480-500 per share.”

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