Railway stocks rise as 7 PSUs achieve ‘Navratna’ status; Is this an investment opportunity?

Indian railway stocks soared up to 5% on Tuesday following the upgrade of Indian Railway Catering and Tourism Corporation Limited (IRCTC) and Indian Railway Finance Corporation Limited (IRFC) to 'Navratna' status. With this, all seven listed railway public sector undertakings (PSUs) now hold this prestigious designation, as confirmed by the Union Railway Minister.

What does 'Navratna' status mean?

The central government grants 'Navratna' status to Central Public Sector Enterprises (CPSEs) that are Miniratna I, Schedule 'A', and have received 'excellent' or 'very good' MoU ratings in three out of the last five years. They must also score at least 60 in six key performance indicators:

• Net profit to net worth
• Manpower cost to total cost of production
• Cost of services
• PBDIT to capital employed
• PBIT to turnover
• Earnings per share

This recognition allows these companies greater financial and operational autonomy, making them more attractive to investors.

Should you buy railway stocks?

With the recent surge, many investors are wondering if this is the right time to buy shares online in railway stocks. Here is what analysts suggest:

• IRCON International Limited (IRCON): Analysts have mixed views, with some rating it as a 'sell' due to weak Q3 performance and others maintaining a 'hold' rating.
• Rail Vikas Nigam Limited (RVNL): Some experts suggest a cautious approach, with a target price of ₹215 per share.
• Indian Railway Finance Corporation (IRFC): The stock has been performing well, benefiting from its financial strength.
• Indian Railway Catering and Tourism Corporation (IRCTC): Analysts suggest a 'buy' rating with a target price of ₹870 per share, pointing to strong financial health.
• Container Corporation of India Limited (Concor): Mixed recommendations due to rail freight cost concerns, with target prices ranging from ₹839 to ₹1,133 per share.

Stock market reaction to the upgrade

Shares of RVNL surged to ₹325.80 per share, bringing its market valuation close to ₹71,000 crores. IRCON International saw a jump to ₹141.73 per share, with its valuation approaching ₹14,000 crores.

IRFC shares climbed to ₹113.28 per share, valuing the company above ₹1.5 lakh crores. RailTel Corporation of India Limited advanced to ₹276.85 per share, and Rail India Technical and Economic Service Limited climbed to ₹199.44 per share. Meanwhile, IRCTC and Concor saw modest gains of around 1% in early trade.

While railway stocks have gained momentum, potential investors must consider individual company fundamentals and expert recommendations. Those looking to buy shares online should evaluate long-term growth potential before making investment decisions.