Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com

 
Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan
            of
 Indian Railway Catering
and Tourism Corporation
         Limited
            Pl
    20172017‐2021for
 Indian Railway Catering
       and Tourism
Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan for Indian Railway Catering and
                                                                    Tourism Corporation

    Table of Contents
1        Executive summary                                                                                 9

2        Analysis of IRCTC’s current business                                                             13
2.1      Company description                                                                              13
2.2      Current vision, mission and objectives of IRCTC                                                  13
2.2.1            Vision                                                                                   13
2.2.2            Mission                                                                                  13
2.2.3            Objectives                                                                               13
2.3      Analysis of the current organization structure of IRCTC                                          14
2.3.1    Observations for the current organization structure of IRCTC                                     16
2.4      Financial performance of IRCTC in last five years (FY 12 – FY 17)                                16
2.5      Key business segments                                                                            18
2.5.1            Internet Ticketing                                                                       19
2.5.2            Tourism                                                                                  21
2.5.3            Catering                                                                                 27
2.5.4            Rail Neer                                                                                32

3        Financial statements assuming “business as usual” scenario                                       39
3.1      Profit and loss account                                                                          39
3.2      Balance Sheet                                                                                    40

4        Proposed strategic options for future growth of IRCTC                                            41
4.1      Internet ticketing                                                                               43
4.1.1            Knowledge Process Outsourcing (KPO) & Affiliate Marketing                                44
4.1.2            Value Added Services                                                                     44
4.1.3            Lead Generation Scheme                                                                   45
4.1.4            Digital Advertisement                                                                    45
4.2       Tourism                                                                                         46
4.2.1            Customer engagement through various marketing channels                                   46
4.2.1            Focus on Outbound and Inbound Tourism                                                    55
4.3       Catering                                                                                        59
4.3.1            Handing over of catering services to IRCTC                                               59
4.3.2            Improving base kitchen infrastructure and network and using it as an aggregator          60
4.3.3            Improving Food, Quality and Hygiene                                                      61
4.3.4            Un-bundling of catering services                                                         63
4.3.5            Improving operational effectiveness through digitization                                 64
4.3.6            Innovative marketing strategies for E – Catering                                         65
4.4       Rail Neer                                                                                       67
4.4.1            Need – Gap analysis for Rail Neer business segment                                       67
4.4.2            Operating models for Rail Neer plants                                                    69
4.4.3            Future capacity expansion and demand coverage over IR                                    71
4.5       Proposed organization structure                                                                 71
4.5.1            Creation of a separate subsidiary for a non-railway tourist segments                     72

5        Financial Statements after implementation of business plan                                       75
5.1      Profit and loss account                                                                          75
5.2      Balance Sheet                                                                                    76

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Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan for Indian Railway Catering and
                                                                    Tourism Corporation

  6         Annexures                                                                                       77
6.1       Outbound Hindu Religious Circuit – Indonesia, Cambodia and Japan                                  77
6.2     Sensitivity analysis for estimating the revenue potential of catering business based on number of
        trains handed over to IRCTC in upcoming years                                                       79
6.3         Financial projections for business as usual scenario                                            81
6.3.1               Internet Ticketing                                                                      81
6.3.2               Tourism                                                                                 82
6.3.3               Rail Neer                                                                               83
6.3.4                Catering                                                                               84
6.4         Financial projections after implementation of the business plan                                 85
6.4.1               Internet Ticketing                                                                      85
6.4.2               Tourism                                                                                 86
6.4.3               Catering                                                                                87
6.4.4               Rail Neer                                                                               89

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Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan for Indian Railway Catering and
                                                             Tourism Corporation

List of Figures
Figure 1: Current organization structure of IRCTC                                                        14
Figure 2: Revenue Growth (FY 12-17)                                                                      17
Figure 3: Breakup of the revenue business segment – FY17                                                 17
Figure 4: Gross profit of IRCTC in last five years (FY 12 - FY 17)                                       17
Figure 5: Gross Margin: Business segment                                                                 18
Figure 6: Growth in number of tickets booked from IRCTC website (in lakh)                                19
Figure 7: Projected Internet Ticket Bookings by 2021(in Cr.)                                             19
Figure 8: Growth in total train passengers (in Cr.)                                                      20
Figure 9: Financial Performance FY 17 (INR in Cr.)                                                       20
Figure 10: Expected growth in direct contribution to GDP by travel and tourism industry in India (USD
billion)                                                                                                 22
Figure 11: Online Travel Market : Growth in selected countries for 2012-17                               22
Figure 12: Key attributes that drive consumer purchase decision in travel and tourism industry           23
Figure 13: Classification of travel and tourism sector in India                                          23
Figure 14: Key product segments within tourism business segment                                          25
Figure 15: Tourism Revenue 2012-17                                                                       25
Figure 16: IRCTC Travel & Tourism segment share in revenue for FY 2016-17                                26
Figure 17: History of IRCTC Catering business                                                            27
Figure 18: Key Issues and Challenges of IRCTC in Catering Services                                       30
Figure 19: Growth in Packaged Water in India (INR Billion)                                               32
Figure 20: Classification of packaged drinking water industry in India                                   33
Figure 21: Packaged water market by type in India in 2014 -15                                            33
Figure 22: Key players in bottled water industry in India                                                34
Figure 23: Critical success factors for the bottled water industry in India                              35
Figure 24: Existing Rail Neer plants of IRCTC and their respective capacities                            35
Figure 25: Revenue & Growth margin in FY 2013-17                                                         36
Figure 26: Supply demand gap for Rail Neer across India                                                  38
Figure 27: Proposed Marketing & Promotion channels across consumer lifecycle                             46
Figure 28: Search Engine Optimization                                                                    47
Figure 29: IRCTC Website                                                                                 48
Figure 30: Makemytrip Website                                                                            49
Figure 31: Mobile marketing penetration                                                                  49
Figure 32: IRCTC's various apps                                                                          51
Figure 33: Mobile apps of makemytrip and goibibo                                                         51
Figure 34: Email marketing value chain                                                                   52
Figure 35: Key sales channels for air tickets                                                            54
Figure 36: Revenue Passenger Kilometers (RPK) annual growth in domestic airline market                   54
Figure 37: Projected Revenue for Airline Ticketing booking segment (INR Cr.)                             55
Figure 38: Performance of the Buddhist Circuit Train in last 5 years                                     56
Figure 39: Key countries in which Buddhism is practiced                                                  56
Figure 40: Major Buddhist tourist destination in India                                                   57
Figure 41: Projected Revenue from Inbound Buddhist Tourism (INR Cr.)                                     58
Figure 42: Food items in aluminum foils are being loaded in trains                                       61
Figure 43: Food Items are being transferred in open tray                                                 61
Figure 44: Food Items are being transferred in open trays in Aluminum foils                              62
Figure 45: Packed food packed being transferred in insulated meals boxes in Chinese Railways             62
Figure 46: On train food trolleys for serving food                                                       63

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Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan for Indian Railway Catering and
                                                             Tourism Corporation

Figure 47: Categorization of services to be unbundled                                                    63
Figure 48: Need Gap analysis for Rail Neer business segment                                              68
Figure 49: Suggested changes in the current organization structure                                       72
Figure 50: Proposed structure of the subsidiary for non - railway tourism                                74

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Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan for Indian Railway Catering and
                                                            Tourism Corporation

List of Tables
Table 1: Number of Departmental Trains (including unbundled) Trains as of Nov, 2017                      28
Table 2: Yearly Revenues of Departmental Catering (INR Cr)                                               29
Table 3: Number of Total Trains as of 03 Nov 2017                                                        29
Table 4: Yearly Revenues of Trains having Licensing Pantry Cars (INR Cr.)                                29
Table 5: Profit and Loss of Departmental Units in (INR Cr.)                                              31
Table 6: Year wise details of number of complaints for IRCTC Mobile units                                31
Table 7: Comparison of Rail Neer with other players                                                      38
Table 8: Marketing Expense of various companies                                                          52
Table 9: Buddhist population distribution in Japan and Republic of Korea                                 58
Table 10: Number of Buddhist tourists from Japan and Korea with their average spend                      58
Table 11: Summary of different models for manufacturing Rail Neer                                       70
Table 12: Comparison of various operating models for manufacturing of Rail Neer                          71
Table 13: Analysis of various models for Rail Neer                                                       71
Table 14: Tour packages offered by some of the prominent travel agencies and sites for Indonesia and    77
          Cambodia

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Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan for Indian Railway Catering and
                                                 Tourism Corporation

Glossary
ADI        Ahmedabad

AGM        Additional General Manager

BBS        Bhubaneshwar

BIS        Bureau of Indian Standards

BOT        Build Own Transfer

BPL        Bhopal

CAGR       Compound Annual Growth Rate

CDG        Chandigarh

CMD        Chairman and Managing Director

Cr.        Crore

CRM        Chief Regional Manager

DCS        Departmental Catering Services

DMRC       Delhi Metro Railway Corporation

ERS        Ernakulum

FFU        Fast Food Units

FP         Food Plaza

FSSAI      Food Safety and Standards Authority of India

FY         Financial Year

GGM        Group General Manager

GHY        Guwahati

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Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan for Indian Railway Catering and
                                              Tourism Corporation

GM      General Manager

GPRS    General Packet Radio Service

HRD     Human Resource Development

Infra   Infrastructure

INR     Indian Rupee

IRCTC   Indian Railway Catering and Tourism Corporation

IT      Internet Ticketing

JGM     Joint General Manager

JP      Jaipur

KPI     Key Performance Indicator

KPO     Knowledge Process Outsourcing

LCC     Low Cost Carriers

LCS     Licensing Catering Services

LKO     Lucknow

MOR     Ministry of Railways

NZM     Nizamuddin

OTA     Online Travel Agency

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Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan for Indian Railway Catering and
                                               Tourism Corporation

PNBE   Patna

POS    Point of Sale

PPP    Public Private Partnership

P&Q    Procurement and Quality

RBI    Reserve Bank of India

RFID   Radio Frequency Identification

RNP    Rail Neer Plant

ROI    Return on Investment

RPK    Revenue Passenger Kilometer

SBC    Bengaluru

SEM    Search Engine Marketing

SEO    Search Engine Optimization

TRAI   Telecom Regulatory Authority of India

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Corporate Plan of Indian Railway Catering and Tourism Corporation Limited Pl 20172017 2021for Indian Railway Catering and Tourism - IRCTC.com
Corporate Plan for Indian Railway Catering and
                                                                           Tourism Corporation

 1        Executive summary
 Indian Railway Catering and Tourism Corporation (IRCTC) is a public sector undertaking under Ministry of
 Railways and a fully owned subsidiary of Indian Railways, which was formed for upgrading, modernizing
 and professionalizing catering services, managing hospitality services at railway stations and promoting
 international and domestic tourism in India through public – private participation. IRCTC has diversified
 into many non - railway businesses such as air ticketing, travel services, bottled water (Rail Neer), budget
 hotels, food plazas and has recently introduced numerous value added services for the train traveler
 such as e – catering.

 The key business segments in which IRCTC operates are:

     INTERNET TICKETING                   TOURISM                         CATERING                     RAIL NEER

     Key focus is primarily         Key focus is tourism          Key focus is catering on       Key focus is on production
     online train ticket booking   related products namely        trains linked to base          and distribution of bottled
     through IRCTC website         holiday packages, train        kitchens, food plazas, fast    water and construction of
     and mobile app                tours, hotel and airline       food     units,    executive   Rail Neer plants
                                   ticketing                      lounges, retiring rooms, e-
                                                                  catering and budget hotels

IRCTC has grown at 29% CAGR since 2012 powered by internet ticketing and tourism segments. The
internet ticketing segment contributed only 37% of the overall revenues (FY 16), but accounted for 83% of
the overall gross profits. Other segments have shown low to negative profitability.
 Although IRCTC has witnessed strong growth in the past, the company faces new threats especially in the
 Internet ticketing segment. Some of the key issues and threats that may impact growth in future are:

      •     Withdrawal of service charge w.e.f. 23.11.2016 to 31.03.2018 is likely to remain.

      •     The overall market size of the online train ticketing segment is steadily reaching saturation

      •     Though the tourism vertical has diversified into many new products and services, there is limited
            market penetration in these highly competitive areas.

      •     Catering business has been adversely affected due to changes in policy since 2010 consequent
            to its transfer to IR. Hence, it has not been possible to build a sustainable business model for
            this business segment. This position has substantially rectified after the promulgation of
            Catering Policy 2017..

      •     IRCTC has not able to ramp up its manufacturing capacity of Rail Neer due to issues concerning
            availability of land and water at the proposed locations and covers just ~37% of overall demand
            over IR.

      •     There is a possibility that the current sale monopoly the company enjoys over IR may be repealed or
            rationalized forcing it to compete in a competitive environment to gain market share on IR.
            Furthermore, IRCTC is also facing a threat from unorganized players who are able to sell at a
            lower price.

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Corporate Plan for Indian Railway Catering and
                                                               Tourism Corporation

Considering the issues and threats faced by IRCTC, at present there is an urgent need to redefine
strategy in order to mitigate the aforementioned risks and develop a sustainable business model which
can leverage the huge potential of the rapidly growing Indian economy and railway passenger segments.
The internet ticketing and tourism segments have huge growth potential and will drive the growth in
future. IRCTC’s website and database are extremely valuable assets and offers numerous ways to
monetize these assets. The business plan focuses on exploiting the potential with supporting
capital expenditure. The identified opportunities will make maximum use of existing IRCTC
infrastructure & resources and work on an asset light model. IRCTC will be able to fund these investments
through internal cash accruals without requiring external financing.
The key growth and optimization opportunities for the different business segments are listed

below:

Internet Ticketing

    •    Knowledge process outsourcing & Affiliate Marketing: IRCTC has access to demographic and
         spend data of millions of users. It has a large user base of more than 4 crore users and daily logins
         of more than 40 lakh. Joining the hands with e-commerce, the variety and volume of such data
         may further surge dramatically. Entry into this segment will leverage the huge customer data base
         with IRCTC and will be targeted at providing customer insights to companies through use of data
         analytics and data warehousing tools. The use of an in-house analytics team will ensure the
         privacy and confidentiality of sensitive IRCTC data.

    •    Value added services: IRCTC hosts 6 lakh+ visits on its booking confirmation page per day. With
         myriad of Value Added Services that IRCTC already has, and others that it may offer in future, we
         believe that this a tremendous volume to create leads for online businesses and generate
         revenues by cross-selling products/services. Value added services will involve delivering various
         services either directly such as e-bed roll, book-a-meal, airline tickets, concierge service or
         through alliance with various service providers such as cab aggregators, food aggregators and
         event ticket aggregators and help in enhancing customer engagement and deriving topline
         growth.

    •    Lead Generation Scheme: Lead generation is the method of getting inquiries from potential
         customers for the purpose of expanding the scope of a business, increasing sales revenues. In the
         old pre-Internet days of sales, lead generation occurred at places like trade shows – visitors to a
         company's booth would fill out a card with their contact information and turn it in to receive a call
         back from that company's sales team. In the present world, this activity has now started
         happening online. IRCTC hosts 6 lakh+ visits on its booking confirmation page per day and more
         than 40 lakh daily logins to IRCTC website. There is a tremendous volume and opportunity to
         create leads for online businesses and generate revenues by providing those leads (inquires)
         products/services of other merchants

    •    Digital Advertisement: The large number of daily visitors to the website throws a opportunity of
         Digital advertising of IRCTC’s Soft Assets. The modern day Digital Advertising techniques though

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Corporate Plan for Indian Railway Catering and
                                                             Tourism Corporation

       Double Click for Publisher (DFP) tool can be used to advertise in most optimal way. Use of Captcha
       on website for differentiating between humans and machines can also be used for Digital
       Advertising.
Tourism
   •   Creation of a separate subsidiary for non-railway tourist segments: Given that tourism is
       an industry with high competition requiring specialized human resources, IRCTC may
       consider creating a separate subsidiary for non – railway tourism services and products, as well as
       a separate marketing team.

   •   Increasing market penetration in the air ticketing business: The Indian aviation market is the
       fastest growing major aviation market in the world. A dedicated strategy for this opportunity
       will enable the company to increase its market share in the rapidly growing air ticketing business.

   •   Outbound and Religious tourism: The company can generate substantial growth by providing
       international tour packages customized for tourists travelling both for religious purpose and
       sightseeing. There is also strong potential to tap inbound tourist for leisure and pilgrimage,
       especially Buddhist pilgrimage tourism.
Catering and Rail Neer
   •   Expand E - catering business: Introduce innovative online marketing strategies to ensure a faster
       growth of the e-catering business. New marketing channels such as Search Engine Marketing
       (SEM) and Social Media campaigns are recommended based on the behavior of the target
       segment which is mainly smart phone users. These marketing channels will not only create
       awareness but also provide more accurate Return on Investment(ROI).

   •   Improve base kitchen infrastructure and network: The existing infrastructure of base
       kitchens needs to be improved using modern technology. Furthermore, the base kitchen
       network should be expanded in order to have greater reach, higher quality control and
       more cost-effective operations. There is a need to attract reputed private catering players
       through an improved selection model as envisaged in catering policy 2017.

   •   Unbundling of catering services: The policy envisages unbundling of food preparation and
       distribution to achieve quality in catering deliverables over IR. Operational efficiencies in
       delivery of catering services over the food production, logistic and distribution cycle will be
       enabled through a variety of IT and quality tools. The latter will assist in positioning a robust
       feedback mechanism to ensure customer friendly catering services.

   •   Improving food quality and hygiene: Food quality will be an outcome oriented aim by duly
       implementing a Comprehensive Quality Assurance Programme (CQAP) over the food production
       and distribution cycle. Use of IT tools and quality processes will be an important component of
       the CQAP initiative. Hygiene initiatives will involve implementation of all food and beverage
       regulatory standards at onboard and off board locations.

   •   Capacity enhancement and improved demand coverage over IR: Faster capacity enhancement
       to achieve 70% demand coverage over IR by 2019. Achieving cost efficiencies in Rail Neer

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Corporate Plan for Indian Railway Catering and
                                                                    Tourism Corporation

        operations through PPP combining capital support from IRCTC will be strategic aim to grow and
        consolidate the business.
Considering the “business as usual” scenario, IRCTC revenues should grow at CAGR of 9% over the next 5
years with gross profits increasing to INR 461.5 Crores by FY 21 from INR 372.5 Crores in FY 17

                          Revenue projections for ”business as usual” scenario

          Parameter                        FY 17            FY 18            FY 19           FY 20           FY 21

Estimated Revenues (INR Cr.)              1599.20          1842.5           2015.0          2194.9          2303.9

Estimated Gross Profits (INR Cr.)          352.50           407.9            432.8           453.0           461.5

After the implementation of the business plan with new opportunities, IRCTC revenues are expected to
grow at CAGR of 16% over the next 4 years. Most of the additional growth will come from the tourism
and internet ticketing segments as per this plan. Gross profits are expected to increase to INR 1,322.5
Crores by FY 21 from INR 352.50 Crores in FY 17.

                      Revenue projections after implementation of growth options

          Parameter                        FY 17           FY 18           FY 19           FY 20          FY 21

     Estimated Revenues (INR Cr.)         1599.20      2,410.4            2,779.7        3,159.2         3,584.2

  Estimated Gross Profits (INR Cr.)        352.50          726.4           891.9         1,069.7         1,322.5

The new business plan will operate on an asset light business model with low capital requirements. The
funding for these new initiatives will be through internal cash accruals and not require financing from
external sources.

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Corporate Plan for Indian Railway Catering and
                                                                 Tourism Corporation

2     Analysis of current business
2.1    Company description
Indian Railway Catering and Tourism Corporation (IRCTC) is a public sector undertaking under Ministry of
Railways and a fully owned subsidiary of Indian Railways. It was established in 1999 with an aim of
upgrading, modernizing and professionalizing catering services, managing hospitality services at the railway
stations and promoting international and domestic tourism in India through public – private
participation. Since then IRCTC has grown rapidly and diversified itself into many non - railway
businesses such as air ticketing, travel services, bottled water (Rail Neer), budget hotels, food
plazas, food kiosks and has introduced numerous value added services for the train traveler such as e –
catering.

2.2    Current vision, mission and objectives of IRCTC
2.2.1 Vision
To be the leading provider of high quality travel, tourism and hospitality related services for a range
of customer segments, with consistently high level of customer satisfaction.

2.2.2 Mission
IRCTC to establish itself as a leader in the area(s) of hospitality services , travel and tourism, packaged
drinking water, and Internet Ticketing by providing value added products and services for passengers,
tourists and other customers, targeting Indian Railways and Non – Indian Railways related services alike,
building a resilient business portfolio that is scalable and based on core competence.

2.2.3 Objectives
The following are the key objectives of IRCTC:

                   •   To provide high quality catering services directly as well as through network of
                       professionally competitive licensees and franchisees.

                   •   To be a significant player in the hospitality business.
                   •   To produce bulk food manufacturing facilities like food factories etc.

                   •   To provide high quality package drinking water (Rail Neer).

                   •   To promote tourism across the country especially for all segments of Rail Passengers.

                   •   To provide single window solution to its customers including train travel, road
                       travel, air travel, hospitality, hotel accommodation and catering etc.

                   •   To develop and operate Executive Lounges, Multi-functional complexes,
                       budget hotels etc. through participation by professionals.

                   •   To maintain leading position in internet ticketing, e-commerce and technology
                       for customers interface for railway passengers/ customers.

                   •   To be a technology driven customer oriented company through constant

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Corporate Plan for Indian Railway Catering and
                                                                          Tourism Corporation

                      innovation and human resource development.
                  •   To promote private sector participation and expertise to improve quality of products
                      and services.

                  •   To imbibe strong customer friendly, professional and ethical work culture.

                  •   To adopt strong Corporate Governance practices and best and transparent industry
                      practices.

                  •   To work towards creation of additional infrastructure on Railway or non-railway
                      premises in their mandated line of business with a view to improve the Gross
                      Block.

2.3 Analysis of the current organization structure of IRCTC

                           Figure 1: Current organization structure of IRCTC

                                             Chairman and Managing Director             Zonal Group General Managers

          Company              Director                                        Director (Tourism              Chief Vigilance
                                                     Director (Finance)           Marketing)                      Officer
          Secretary           (Catering)

                               GGM - HRD

                                                             GGM – Finance                   GGM – Tourism
                               GGM - DCS

                                                            GGM – Finance                    GGM – Services
                               GGM - LCS

                                                                                            GGM – IT (Project)
                                GGM RNP

                               GGM - Infra                                                         GGM – IT

                                GGM – P&Q
                                                                   •      GGM – Group General Manager
                                                                   •      HRD– Human Resource Department
                                 GGM -RNP                          •      DCS – Departmental catering Services
                                                                   •      LCS – Licensee Catering
                                                                   •      RNP – Rail Neer
                               GGM RNP                             •      PQ – Procurement & Quality
                                                                   •      IT – Internet Ticketing

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Corporate Plan for Indian Railway Catering and
                                                                Tourism Corporation

Key highlights of the current organization structure :

     •    The organization is headed by the Chairman and Managing Director (CMD), who is responsible for
          overseeing and managing the overall operations of the organization.

     •    The organization structure is broadly divided into two groups - Corporate and Zonal.

     •    The corporate group is mainly focused on planning and coordinating work with the zonal group.
          The zonal group is focused on implementing the plans proposed by the corporate group and
          handling day to day operations.

     •    The human resource activities are guided by Department of Public Enterprise (DPE) rules.

     •    Within the corporate group there are three business directors - Director Tourism, Director Catering
          Services and Director Finance.

               The Director Tourism oversees tourism, air ticketing and internet ticketing .

               Director Catering Services oversees departmental catering ,licensee catering , e-catering
                services and budget hotels.

               Director Finance supervises the overall financial aspects of company operations. These
                directors are members of the board and report directly to the CMD.

     •    Each director has Group General Manager(s) (GGM) reporting , who in turn are supported by
          General Manager (s) (GM), Additional General Manager (s) (AGM) and Joint General Manager (s)
          (JGM).

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Corporate Plan for Indian Railway Catering and
                                                                Tourism Corporation

      •   At the zonal level, the Group General Manager (s) (GGM) are responsible for implementing the
          business plan and all on-ground activities. There are five zonal GGM (s) (GGM - North, GGM - South,
          GGM - East, GGM - West and GGM – South Central). These GGM (s) are supported by Chief
          Regional Managers (CRM) and Area Managers.

      •   Unlike the corporate GGM (S), the Zonal GGM (s) report directly to the CMD.

 2.3.1    Observations for the current organization structure of IRCTC
The following are the key observations for the current organization structure:

  •       Representation of shared services functions at corporate level: There is no separate
          representation of the shared service functions (such as Human Resources) in the current
          organization structure. In the existing structure, the GGM – Human Resource Development
          reports to Director Catering Services. There would be a need to review this aspect in case staff
          strength increases substantially.

  •       Alignment of a position with work role: The GGM – Infrastructure looks primarily into budget
          hotels and other construction works for IRCTC. The budget hotels falls under tourism vertical
          whereas the GGM – Infrastructure reports to the Director Catering Services. Moreover, GGM
          – Infrastructure is also responsible for other activities such as purchase of office furniture and
          other corporate office requirements. There is a strong case to combine the infrastructure and
          budget hotel function under GGM Services.

  •       Dedicated marketing function: There is no dedicated marketing team for advertising
          tourism products, air ticketing products, travel packages, budget hotels and other promotional
          schemes related to tourism creation of such marketing teams is therefore essential.

  •       Skill based selection process: For certain specialized functions, people with right experience are
          selected or deployed from Indian Railways. However, for some functions such as Procurement,
          Infrastructure, Tourism and IT, recruited employees do not have the required skills. Training
          programmes to be dovetailed to this requirement.

2.4 Financial performance FY 12 – FY 17
The total revenues for IRCTC has grown at a CAGR of 24% since 2012. The year – on – year growth has also
been consistent except for the financial year 2015, when the revenues grew only by 20%. The primary
reason was lower growth in the fastest growing segments of IRCTC i.e. internet ticketing and tourism. In
financial year 2017, Internet ticketing grew by (34%) (i.e. from INR 551 Cr. in 2016 to INR 362 Cr. in 2017).
The internet ticketing and tourism business segments have been the largest contributors to revenue in
2017, (approximately ~ 55%). The proportion of the contribution of two segments to the overall revenue
has also been growing consistently since 2012. The figure below shows the financial performance of
IRCTC in last six years.

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Corporate Plan for Indian Railway Catering and
                                                                           Tourism Corporation

                                                  Figure 2: Revenue Growth (FY 12 - FY 17)

                                                                                                           1599
                                                                                       1503

                                                                    1141
                                               953
                            716
      543

      2012                 2013               2014                  2015               2016                2017

                                         Figure 3: Breakup of Revenue- Business Segment - FY 17

    OTHER INCOME                                     167

LECENCEE CATERING                                 158
                                                                                               AMOUNT IN Cr
           RAILNEER                                  168

     DEP-CATERING                                             221

           TOURISM                                                                                          523

                 IT                                                                 362

                      0             100               200            300              400            500               600

The gross profits of IRCTC has grown at a CAGR of 32% between 2012 and 2017. Gross profit has grown
consistently since 2013, except in 2016 & 2017. This is primarily because the cost of operations grew by
29% in2016 due to a substantial increase in the share of Indian Railways in revenue from online tickets
(i.e. from INR 20 Cr. in 2015 to INR 291 Cr. in 2016) and withdrawal of service charge.
                                           Figure 4: Gross profit of IRCTC in last five years (FY 12 - FY 17)

     400                                                                                                        352
                                                                                            327
     300                  Amount In Cr
                                                                           234

     200
                                                        144
                                    108
                 91
     100

       0
                2012               2013               2014                 2015             2016                2017

                                                              17
Corporate Plan for Indian Railway Catering and
                                                                               Tourism Corporation

The overall Gross Margin registered INR 352.39 crores in FY 17 of which internet ticketing 56 %, positive, like
all other segments except departmental catering which contributed negative 15% of Gross Margin. The latter
posted negative margin due to transfer of catering to IR in 2010 until 2017 wherein the business was
rendered unsustainable due to high operating and administrative costs.
                                                      Figure 5: Gross Margin* : Business Segments FY 17

  250             198
  200                                                                                                  AMOUNT IN Cr
  150
  100                             60                     67
                                                                               32                                           47
   50
    0
  -50              IT           TOURISM               LECENCEE            RAILNEER            DEP-CATERING OTHER INCOME
 -100                                                 CATERING                                     -52

 * Overall Gross Margin FY 17 : INR 352 Crores
 The departmental catering services (DCS) business segment has not been able to make profits since past
 five years. Catering business has been affected due to changes in policy regarding ownership of catering
 activity by IRCTC and therefore, it has not been possible to build a sustainable business model for this
 business segment.

 2.5 Key business segments
 According to the current structure, IRCTC is divided into four main businesses:
     • Internet Ticketing
     • Tourism
     • Catering
     • Rail Neer
 The following diagram elaborates on the key business segments:

     INTERNET TICKETING                     TOURISM                            CATERING                            RAIL NEER

                                  Air Travel                          •   Departmental catering
    •   Internet train ticket                                             o 5 Base kitchens                •   Procurement of raw
        booking                   •   Air ticketing                       o 1 Central kitchen                  material
        o IRCTC website
                                  •   Travel and tour
                                                                          o
                                                                          o
                                                                            Food kiosks for DMRC
                                                                            RRs,Jan Ahaars & Cell
                                                                                                           •   Manufacturing of Rail
        o Mobile App                  packages (outbound                                                       Neer
                                                                            Kitchens
    •   IRCTC Wallet                  and inbound)
                                                                      •   Licensee Catering
                                                                                                               o 5 IRCTC
    •   IRCTC SBI Cobranded       •   Domestic air packages               o Serves food in trains
                                                                                                                 owned plants
                                                                                                               o 2 PPP based plants
        Credit Card
                                  Train Travel
                                                                          o Food Plazas
                                                                          o Fast food units
                                                                                                           •   Sales and distribution
                                                                                                               o Railways
                                  •   Train tour packages             •   E catering / Food on track           o Kiosks at stations
                                  •   Special trains / Luxury         •   E bedroll                              on Trains
                                      trains / Semi luxury            •   Executive lounge
                                      trains                          •   Retiring Rooms
                                  •   Other tours and                 •   Budget Hotels
                                      services

                                                                 18
Corporate Plan for Indian Railway Catering and
                                                                           Tourism Corporation

  2.5.1      Internet Ticketing: An overview

IRCTC currently has a monopoly in Indian Rail Internet Ticketing. Its current strength includes the volume of daily portal
visitors and ticket bookings. It currently experiences 40 lakh+ daily logins on its website and 6 lakh+ ticket bookings per
day. Such huge volumes bring myriad opportunities for innovative ways to generate incremental revenue from its
digital real estate.

                                  Figure 6: Growth in number of tickets booked from IRCTC website (in cr.)

     25.00
                                                  NON AC                  AC
     20.00

     15.00                                                                                       13.08
                                                                               12.44
                                                           11.29
     10.00                             9.64
                    8.50

      5.00
                                       6.16                7.01                 7.49              7.85
                    5.57
      0.00
                    2013              2014                 2015                2016               2017

 In 2017, 61% of total Indian Rail tickets bookings were online, through IRCTC. This proportion is
 expected to increase to approximately 75% over next 4 years, before it stabilizes.

 Year                                         2017                2018           2019            2020             2021
 Online Booking %                              61                  65             69              72               75

This volume is therefore expected to grow at a CAGR of 3.1% to become 26+ Cr. online tickets bookings
annually through IRCTC.

                               Figure 7: Projected Internet Ticket Bookings by 2021(in Cr.)

          30
                                                  NON AC                  AC
          25

          20
                                                                  15.37                15.83              16.31
                                          14.90
          15          13.80
          10

             5        7.85                 9.03                    9.3                  9.58               9.86
             0
                     2017P                2018P                   2019P                2020P              2021P

Another key strength of IRCTC is the volume of passengers that travel every day on IR, who book their
tickets through IRCTC. It is expected to grow over 42 Cr. + IRCTC passengers travelling on IR in 2018, which
translates to nearly 12 lakh passengers a day.

                                                             19
Corporate Plan for Indian Railway Catering and
                                                                    Tourism Corporation

                              Figure 8: Growth in total train passengers (in Cr.)

       50.0                                                                               42.5
                                                            36.0          37.3
       40.0                                  32.9
                  25.4         27.9
       30.0
       20.0
       10.0
        0.0
                 2013        2014          2015           2016          2017             2018

Around 2.2 Cr. passengers travel on IR each day, of which nearly 8% are “Reserved” passengers. Such huge
numbers and web traffic provide exciting opportunities for e-commerce players.

Over the last 5 years, staggering growth has been witnessed in e-commerce and m-commerce to
penetration in India. Mobile internet penetration has now reached 372 million users. E-tailing industry is
already witnessing over 1 Million transactions per day. Average order value in India is already INR 1950, and
is expected to grow sharply over next 5 years.

Financial performance of internet ticketing segment
      The internet ticketing segment generated 467 Crore revenue for IRCTC in FY 2017.
                                        Figure 9: Financial performance FY17 (INR Cr.)

        500       467
        450
        400
        350
        300                                                                                       268.6
        250                  181.1                                                                             198.37
        200
        150
        100                                 30.4          28.0                           29.0
         50                                                               0.1
          0

The internet ticketing segment generated a total revenue of INR 467 Cr. in FY 2017, 77% of which
constituted service charge. Service Charge on e-ticketing has been withdrawn w.e.f. 23-11-2016 up to 31-03-
2018. There is no clarity on its restoration in near future.

                                                         20
Corporate Plan for Indian Railway Catering and
                                                                      Tourism Corporation

                          Projected Ticketing Revenue & Margins: Business as usual (INR Cr.) FY 2017-21

         500       467
                                Total revenue                Operating Profit / Gross Profit/EBITDA
         450
         400
         350
         300
                                                                                                          236
         250                                                                         209
                         198             187                   182
         200
         150
                                                87                                                               76
         100                                                         62                     69
          50
           0
                         2017                  2018                  2019                  2020                 2021

Key Issues & Threats

Critical Issues

    •   User Interface
        Interface streamlining and re-categorization of products/services required to ensure coherence with
        user lifecycle to enhance visibility and thereby overall top line for various captive IRCTC offerings.

    •   Customer Engagement
        The average time spent on the IRCTC website stood at ~4 minutes and 23 seconds for the period of
        July 2014 to June 2015 against the industry standard of 6 minutes. This indicates that customer
        engagement is a critical area of concern for IRCTC.

    •   Partnerships/ Alliances
        Existing partnerships and alliances are not being able to garner desired amount of traction for IRCTC.

Critical Threats

    •   Withdrawal of Service Charge
        Service Charge on e-ticketing was withdrawn from 23.11.2016 and current withdrawal is up to
        31.03.2018. There is no certainty on the revival of IRCTC surcharge in coming financial years.
        Withdrawal of service charges levied per booking has adversely impacted the overall revenue and
        profit margins.

    •   Market Size Saturation
        Although online share of ticketing has increased (from 40% in 2012 to 61% in 2017), the overall
        growth in train ticket bookings (online and offline) has not grown at an attractive rate. Therefore,
        going forward, the rate of growth for internet ticketing may decline significantly.

2.5.2 Tourism: An Overview

Travel, tourism and hospitality is the third-largest sub-segment of the services sector in India. It
contributed nearly USD 43 billion directly to the Gross Domestic Product (GDP) in 2015 and expected to

                                                          21
Corporate Plan for Indian Railway Catering and
                                                                        Tourism Corporation

grow at a CAGR of 10.2% to reach USD 86 billion in 2025.
   Figure 10: Expected growth in direct contribution to GDP by travel and tourism industry in India (USD
                                                   billion)

             10 % CAGR

                                                                                               86

                                                                               43
                                                               40
                                              31
                               26
                18

              2006           2009            2011           2013              2015            2025E

 The industry is segmented into offline and online segments. India’s online travel segment grew by ~18%
 during 2013–2016 and outperformed the overall travel market. Online travel (gross bookings) now
 constitutes an estimated 41% of the overall Indian travel market.
 India has the third largest internet population in the world. India also has a high mobile penetration
 with more people having mobiles than people having personal computers. Online travel industry has
 huge potential from these customers. Indian online travel market has shown comparatively higher
 CAGR compared to other countries.

                Figure 11: Online Travel Market : Growth in selected countries for 2012-17

                                                                    31%

                                                                                     18%
                               14%
                                                10%
               7%                                                                                     7%

               US              China           Russia               India            Brazil         Australia

 Indian consumer travelling for leisure & pilgrimage has been further sub-categorized into the following
 segments

      •   Visiting Friends /Relatives
      •   Celebrations
      •   Scenic Beauty
      •   Adventure
      •   Weekend Getaway
      •   Pilgrimage

                                                          22
Corporate Plan for Indian Railway Catering and
                                                                      Tourism Corporation

 Travel Frequency and Seasonal impact
 Indian consumers like to plan their travel well in advance. Travels are mainly planned around
 personal vacations, special occasions like birthdays and anniversaries, festivals & kids vacations. Marketing
 of service offerings is required to be aligned with the pattern of consumer buying traits.
 Purchase Decision
 Major attributes contributing to purchase are price, service quality and personal experience as per “Octane
 e-Travel India Study 2015”.
       Figure 12: Key attributes that drive consumer purchase decision in travel and tourism industry

Classification of travel & tourism industry in India
India travel & tourism industry is segmented into three major segments namely hotel booking, tour packages
and tickets.
                          Figure 13: Classification of travel and tourism sector in India

                                                 Travel &
                                                 Tourism

                                                  Tours &
                      Hotel Booking                                       Tickets
                                                 Packages

                                                                                     Non Air
                                                            Air Tickets
                                                                                     Tickets

Key industry players in India

The industry is currently divided into the online & offline market. Major competitors for IRCTC in Indian
Travel and Tourism market are

                                                          23
Corporate Plan for Indian Railway Catering and
                                                                Tourism Corporation

     •   MakeMyTrip

     •   Cleartrip

     •   Thomas Cook

    •    Cox & Kings

    •    Yatra

    •    SOTC

    •    Goibibo

    •    Expedia

     •   Travel guru

     •   Akbar Travels of India Pvt. Ltd.

Tourism segment business in IRCTC

IRCTC Tourism offers the following services:

     •    Travel Ticket Booking: IRCTC provides services for booking Air tickets through its online air
          ticketing portal and app. Air tickets are being provided at highly competitive prices for both
          domestic & international airlines.

     •    Online Hotel Booking: IRCTC provides online booking for Rail Yatri Niwas (IRCTC Hotels), lounges
          and Railway retiring rooms. IRCTC is trying to tie up with hotels for providing booking services for
          hotels across India.

     •    Tours and Packages: Services offered includes various land & air tour packages for
          different themes like leisure, pilgrimage etc. Packages currently provided are domestic
          packages, international (both inbound & outbound packages) and customized packages.

     •    Railway Tour Packages and Special Trains: IRCTC operates special trains and semi luxury trains for
          different themes and itineraries such as Buddhist Train on Buddhist sector, Desert Circuit on
          Rajasthan sector, Tiger Express covering Ranthambore Tiger Reserve and City of lakes- Udaipur.
          IRCTC also runs a super luxury train “Maharajas' Express”.
          Charter Train booking services are also provided by IRCTC. In addition Election Special trains are
          operated by IRCTC for movement of paramilitary forces during General and Assembly elections.
          State Specials trains are operated by IRCTC in accordance with the requirement of state
          government sponsoring the trains. These trains offers packages on nominal charges of Rs. 900/-
          per pax per day for sightseeing and pilgrimage purposes.

     •    Miscellaneous: IRCTC also provides travel services for individuals a n d Corporates such as
          LTC (Leave Travel Concession) and customized packages & other miscellaneous travel related
          services like travel insurance, visa processing etc.

                                                      24
Corporate Plan for Indian Railway Catering and
                                                                  Tourism Corporation

Segmentation of various tourism products is depicted below.
                     Figure 14: Key product segments within tourism business segment

Financial performance of Tourism segment
                                 Figure 15: Tourism Revenue* (FY2012-2017)

 600                                                                                                  529
 500                 Amount In Cr

 400                                                               362                 374
                                                  324
 300
                                 189
 200
               99
 100

    0
              2012               2013             2014             2015                2016           2017

*Total Revenue: INR 1599 crore

                                                         25
Corporate Plan for Indian Railway Catering and
                                                                  Tourism Corporation

The total revenue earned from sales of Tourism segment accounted for 34% of the total revenue of IRCTC
in FY 2017. The growth rate has sharply increased to nearly 40% in FY 2017 from 3% earlier mainly due to
increase in state and election special trains in 2016-17.
Railway related tourism products accounted for approximately 80% of the total revenue. IRCTC has entered
in all major tourism segments such as hotel, holiday packages, airline bookings etc. It is also planning to
enter/expand into other segments such as helicopter travel, medical tourism etc.
                Figure 16: IRCTC Travel & Tourism Segment share in Revenue for FY 2016- 17

Issues and threats
The key issues and threats being faced by the tourism segment are as follows:
                         Issues                                                  Threats

 •    Low market share in major sub-segments             •   High Competition
      such as airline ticketing
                                                         •   High uncertainty in sales volume due to
 •    Low brand recall amongst consumers.                    dependency on government requirements and
                                                             election schedules for railway related travel
 •    IRCTC’s holiday package segment has lower
                                                             products.
      profit margin
 •    High dependency on government and Indian
      Railways
 •    Lack of skilled human resources

                                                       26
Corporate Plan for Indian Railway Catering and
                                                                  Tourism Corporation

2.5.3 Catering
2.5.3.1 Key developments in the catering business since the establishment of IRCTC
IRCTC was formed in 1999 by Indian Railways to improve Catering and Tourism services. The objective was to
professionalize catering services and by introducing the best technology and human resources with better
logistics and professional expertise. In 2002-03, catering service of Indian Railways was handed over to
IRCTC on ‘as is where is’ basis along with the staff in catering department of Indian Railways.
IR issued a catering policy in 2005 wherein, the Ministry of Railways gave directions to IRCTC on several
catering related mandates such as menu, prices, the process of hiring contractors etc. This policy
restricted the flexibility of IRCTC to fulfill its mandate.
Further, a revised catering policy was announced in 2010 by Indian Railways which took away mobile
catering services including base kitchens and mobile catering from departmental catering. The policy
also stated that the Railway Board would determine the menu and tariff for the standard meals,
breakfast, tea, coffee and catering charges for meals, etc., Zonal Railways would be responsible for fixing
the menu and tariff for all other items including a-la-carte items and Jan Ahar outlets.
IRCTC was to be primarily responsible for running of Food Plaza, Food Courts and fast food units within the
ambit of this policy.
As per 2016-17 Rail Budget, IRCTC has been restored the responsibility for the entire catering services
on IR. As per the new catering policy 2017, IRCTC will unbundle catering services by creating a distinction
primarily between food preparation and food distribution. 10 more IRCTC operated, mechanized,
sophisticated base kitchens are be added to ensure fresh and hygienic supply of food on trains.
                              Figure 17: History of IRCTC Catering business

                                                       27
Corporate Plan for Indian Railway Catering and
                                                                   Tourism Corporation

2.5.3.2 New Catering Policy Feb-2017

SALIENT FEATURES

     •   IRCTC has been mandated to carry out the unbundling by creating a distinction primarily between
         food preparation and food distribution, In order to upgrade quality of food preparation IRCTC shall
         be setting up new kitchens and upgrade existing ones.
     •   IRCTC shall be responsible for catering services through mobile catering units, Base Kitchens, Cell
         Kitchens, Refreshment Rooms at A1 & A category of stations, Food Plaza, Food Courts, trains side
         vending, Jan Ahaars.
     •   IRCTC shall manage catering service on all mobile units having pantry car service presently with
         IRCTC. IRCTC shall also take over management of catering services on train for which contracts have
         not been awarded by Zonal Railways due to various reason or trains are being run departmentally by
         Zonal Railways.
     •   IRCTC shall determine the menu of standard meals as also of Rajdhani/ Shatabdi/ Duronto, in
         consultation with Zonal Railways, keeping into consideration the local taste and cuisine. The
         standard meals served in trains shall be within fixed tariff approved by Railway Board.
     •   Sale of a-la-carte items, Ready-to-Eat (RTE)meals shall be permitted both through e-catering and
         onboard services by IRCTC
 2.5.3.3 Existing business model of IRCTC’s business, Catering services is segregated into two
 departments:
         a.     Departmental catering services
         b.     Licensing catering services.
 Departmental Catering Services (DCS)
 This functional department of IRCTC catering service manages all the operations related to mobile units
 either departmentally or through Licensing. Mobile catering is being managed under the Departmental
 catering services department. As of 03rd Nov'17, around 25 trains were running departmentally:
                         Table 1: Number of Departmental Trains (including unbundled trains) as of Nov'17
                      Type of Trains                                          Number of Trains
                        Rajdhani                                                   08
                        Shatabdi                                                   01
                        Duronto                                                    10
                       Mail/Express                                                06
                          Total                                                    25
 DCS also manages three base kitchens namely, Central Kitchen at Noida, Base Kitchens at New Delhi and
 Howrah. Base kitchens at Ahmedabad & Patna used to be managed departmentally and have now been
 outsourced. Base kitchen at Mumbai Central has been taken over from IR and has now been outsourced.

 Departmental Catering services generated revenue of INR 221.8 Cr13 in FY 17 which is 7% lower than
 revenue in FY16 and generated an operating loss of INR 52.1 Cr13 in FY17. Railway Business contributed
 93% of total of sales turnover while non-Railway Business contributed 7% in FY17.

                                                        28
Corporate Plan for Indian Railway Catering and
                                                                      Tourism Corporation

                             Table 2: Yearly Revenues of Departmental Catering (INR Cr)
  Sub Segments                2011-12        2012-13       2013-14           2014-15         2015-16       2016-17
  Railways Business            172.41         193.55        226.85            249.25          211.06        203.9
  Non Railways Business         10.79          28.64         37.42             35.17           27.36         15.9
  Other income                   1.40           3.50          0.55              0.85            1.73          2
  Total                        184.60         225.69        264.82            281.31          240.15        221.8
 Pantry services also include Suvidha and Holiday special trains which run on temporary basis for few trips.

                          Table 3: Number of Total Trains as of 3rd Nov'17
                      Type of Trains                                              No: of Trains
             Rajdhani (incl. Tejas & Gatiman)                                          20
                         Duronto                                                       19
                         Shatabdi                                                      23
                      Mail/Express                                                    237
                          Others                                                       30
                           Total                                                      329

Income from licensing services of mobile units has increased significantly since FY 2015 which clearly
signifies the shift in focus of the Departmental Catering model towards Licensing model.
                 Table 4: Yearly Revenues of Trains having Licensing Pantry Cars (INR Cr.)

        Sub Segments            2012            2013           2014            2015           2016          2017
     Railway's Business         7.85            3.73           1.84            38.36          40.88        120.03
          Total                 7.85            3.73           1.84            38.36          40.88        120.03

The revenue of mobile trains has increased 3 times due to temporary licensing during the FY2016-17.
Licensing Catering Services (LCS)
Licensing catering services department of IRCTC handles the operations of all the static units, which include
122 Food Plazas, 109 Fast Food Units, 2 Executive Lounges and E-catering services as on 31’Oct 2017.

Combined income from these services was INR 37 Cr 18 in FY 2016-17 as compared to INR 31 Cr 18 in FY
2015-16. Presently IRCTC is Operating 231 Units and is expected to rake in Rs.45 Cr. in FY 2017-18. Another
90 Units are expected to be commissioned by the end of FY 2018-19 generating additional revenue of Rs 30
Cr (approx.). There are about 200 A1 and A category of stations to be covered and it is proposed to
commission 40 units on an average every year for the next five years.

E-Catering

E-Catering services have commenced in September 2014 which now covers around 300 stations with
participation by major industry players such as Dominos, KFC, McDonald's etc serving 7000 meals per day
on the IR network and will progressively cover 408 "A-1" and "A" class stations.

Executive Lounges

This pre departure - post arrival facility commenced in Nov 2012 with two working lounges at New Delhi
and Vishakhapatnam providing services such as F&B, Hotels Concierge, Wifi, Recliner facility, Dormitory

                                                          29
Corporate Plan for Indian Railway Catering and
                                                                     Tourism Corporation

beds, Wash and change, travel desk etc grossing 1.01 cr p.a. The business is on the uptick with 8 lounges
planned next fiscal over 49 stations earmarked over IR in the first phase.

Retiring Rooms

Indian Railway currently managing around 2000 Retiring Rooms spread across more than 600 Railway
stations all over Indian Railways network. The facility is meant for providing reasonable, safe transit
accommodation to bonafide railway passengers. The reservation of the Retiring rooms can either be made
through counters available at Railway stations and also through online booking facility available at
www.irctc.co.in.

Currently the facilities included in the Retiring Rooms are AC and non AC rooms with attached/common
bathrooms, AC and non AC dormitories with common bathrooms, limited food and beverages services,
lockers etc. For the upgradation and maintenance of retiring room at Railway Stations, service providers will
be engaged on Public Private Partnership (PPP) basis and they have to invest in infrastructure. The existing
complex can be expanded by constructing more rooms/other facilities wherever feasible subject to
approval of IRCTC and Railway authorities. Service providers have been empanelled agreement signed with
Zonal Railways and tenders are under finalization in FY 18.

Budget Hotels

The business is part of IRCTC's mandate as enshrined in its articles. Four properties are in operation at
New Delhi, Howrah, Puri and Ranchi, the latter two being heritage properties. The revenue slated to be
earned for FY-18 is 2.98 cr approximately. A hotel project at Lucknow is planned during the current fiscal
through PPP with budgeted investment of 37 cr.

2.5.3.4 Issues and challenges with the catering business segment: IRCTC faces the following major
challenges.
                    Figure 18: Key Issues and Challenges of IRCTC in Catering Services

                                              Dependency
                                               on Indian
                                               Railways

                        E-Catering                                  Food Quality
                        Business                                     and Hygiene

                                                            Proposed Infra
                                Catering                     upgradation &
                                 Waste                       networking of
                               Management                   Base Kitchen
                                 System                     & Pantry Cars

                                                         30
Corporate Plan for Indian Railway Catering and
                                                                       Tourism Corporation

Frequent policy changes
Catering business has been adversely affected due to policy changes in 2010 leading to transfer of
catering to IR. Since then, it has not been possible to build a sustainable business model for this
segment. IRCTC has invested in manpower, infrastructure, technology, systems and processes when
catering services were first in 2001. Catering has been transferred back to IRCTC pursuant to a new
catering policy rolled out in 2017 and the takeover process has gathered momentum with an appropriate
strategy and implementation plan in place.
                          Table 5: Profit and Loss of Departmental Units in (INR Cr.)
      Parameter               2012           2013               2014         2015            2016              2017

Profit and Loss of           -50.94         -57.96           -66.03          -54.9           -66.49           -54.18
Departmental Units

Food Quality and Hygiene Issues

As per IRCTC data, out of 1,878 complaints received from 1st Jan 2017 to 31st Oct, 2017, 529 complaints
were related to poor quality of food, 55 for less quantity and 35 for hygiene. Also around 35% of complaints
in last year are related to poor quality of the food alone. This clearly indicates the need for quantum
improvement in quality of food served in trains.

                 Table 6: Year wise d etails of number of complaints for IRCTC          Mobile units
     Parameter            2017 (Till 31.10.2017)                   2016                                2015
                          No. of       % of total      No. of          % of total         No. of          % of total
                                                     complaints                         complaints
    Overcharging            710           37.81%          281             16.02%             1                 0%

       Quality              529           28.17%          648             36.94%            620               49%
      Quantity               55            2.93%          58              3.31%             73                 6%
    Misbehavior              40            2.13%          59              3.36%             52                 4%
      Hygiene                35            1.86%          27              1.54%             31                 2%
   Miscellaneous            509           27.10%          681             38.83%            476               38%
        Total              1878            100%          1754             100%             1,253                100%

Limited Infrastructure in Base Kitchens and Pantry Cars
There is a need for developing base kitchens as per modern standards (ISO 22000). Water used in the
pantry cars for cooking is same as that used in toilets. There are no RO plants installed in the pantry
cars. Space for stacking of food in coaches is a cause of concern.
Catering Waste Management System
Leftovers and other catering waste have to be properly disposed of. In general, waste is being thrown out
of the trains. This causes degradation in the quality of the tracks. In railway stations, catering waste is
being thrown on the tracks which causes a bad perception from the point of cleanliness of stations.

                                                           31
Corporate Plan for Indian Railway Catering and
                                                                      Tourism Corporation

    Also a mechanism for proper waste disposal according to the type of waste (biodegradable, non-
    biodegradable and recyclable) has to be developed.
Low penetration in E – Catering Business.
As on 1st May, 2016, E- catering services are live on 221 stations with 2,976 meals being sold daily on
average. 209 vendors and 8 food aggregators have registered with the E – catering service.
E-Catering services have shown sharp growth from 299 average meals per day in Oct-15 to 2,976 average
meals per day in May 2016. However, the growth has been low compared to what was anticipated by
IRCTC inspite of the coverage of 408 stations.

2.5.4 Rail Neer: Industry Overview
Packaged drinking water is one of the largest growing markets in India, mostly driven by rising awareness
about health issues and scarcity of clean drinking water. Other factors that drive the growth of this industry
in India are:

•     Increasing population and growing urbanization
•     Increasing scarcity of safe drinking water and ease of availability of bottled water
•     Increasing on-trade consumption of packaged water due to wide availability of a variety of bottled water
      brands in all on-trade channels including small kiosks and premium restaurants
•     Rise in per capita income and rapidly changing lifestyles of people
•     Rapid growth of Travel & Tourism sector
                            Figure 19: Growth in Packaged Water in India (INR Billion)

                        CAGR ~18%
                                                                                     150

                                                                       135

                                                         125

                                          100
                            80

                           FY13          FY14           FY15          FY16           FY17

    The packaged water market in India was estimated to be around INR 150 billion in FY 17 and has grown
    at CAGR of 18%. It is expected that the packaged water sector will continue to maintain its past growth
    rate momentum until FY21 and beyond as water is essentially demand inelastic.
    The Bureau of Indian Standards (BIS) has formulated Indian Standard (IS) for packaged water and premium
    natural mineral water under mandatory BIS certification as per Food Safety and Standards Authority of
    India (FSSAI). Packaged water manufacturers need to acquire ISI and BIS certification prior to
    commencing production.

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Corporate Plan for Indian Railway Catering and
                                                                          Tourism Corporation

2.5.4.1 Classification of packaged drinking water industry in India
 The organized packaged water industry can broadly be classified as bottled water, premium water, and
 herbal water.
                   Figure 20: Classification of packaged drinking water industry in India

2.5.4.2 Packaged drinking water industry in India
 Bottled water accounts for ~ 87% of the total packaged water market in India. The overall market for
 bottled water in India is estimated at INR ~10934 Billion in FY 15 and has grown at CAGR of 22%

                        Figure 21: Packaged water market by type in India in 2014 -15

                                                                               Others
                     Packaged Premium                                           1%
                    Natural Mineral Water
                             12%

                                                        Total packaged
                                                        water market in
                                                            India:
                                                        INR 125 Billion

                                                                              Bottled Water
                                                                                   87%

 India’s per capita consumption of bottled water was about 15-2012 liters in 2013 and is expected to increase
 to 30 liters by 2020.

2.5.4.3 Key players: Bottled water industry in India
The packaged water industry in India is highly fragmented. The organized packaged water segment
comprises of national players having pan India presence as well as regional players. There are more than
3,500 registered players in the organized sector.
Almost 83% of the total market for bottled water in India is dominated by branded players like Bisleri,
Kinley, Aquafina and Bailey. Smaller brands and fragmented unorganized players (more than 1800 players
in India) form ~16% of the market.

Rail Neer accounts for ~ 1% of the total market for bottled water in India.

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Corporate Plan for Indian Railway Catering and
                                                                     Tourism Corporation

                          Figure 22: Key players in bottled water industry in India

2.5.4.4 Critical success factors for the bottled water industry in India
Bottled water industry in India is highly competitive. Considering the low product differentiation it is
obligatory for any player to possess certain essential capabilities in order to gain a considerable share in the
market and compete effectively with the competitors. Some of the critical success factors of the bottled
water industry are as follows:
          Packaging and branding: The brand recall and association plays an important role for getting
          customers to choose one brand over others. Attractive packaging and advertisement also helps in
          higher brand recall.
          Marketing: To survive in the competitive market, each brand strives to outperform competitors by
          focusing on targeted promotions and marketing campaigns. Further, as the product has low
          differentiation, therefore for greater market penetration it is essential for any player to spend
          considerably on the effective marketing of their respective products.
          Distribution and customer reach: Vast and well spread distribution network ensures that
          the company’s product reaches maximum retailers and customers thus increasing volumes.
          Considering the bulkiness of the product the transportation and logistics require considerable
          expenditure, yet it is essential for any player to have a strong delivery and distribution network.
          Operational excellence and economies of scale: Efficient operations lead to lower costs incurred
          during manufacturing process and hence greater margins for manufacturers. It also provides
          flexibility to a player to offer a lucrative deal to the retailer for selling its products to end
          consumers.
          SKU depth: Multiple SKUs help in catering to a large number of customer segments like weddings,
          social and business events and airline industry.
          Product Variants: Having a variety of products is also essential for a company to create a wider
          presence in the market by catering to the requirements of different types of customers.

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