A new recipe – IRCTC has begun cooking for companies

When life handed it a lemon, the government-owned Indian Railways Catering and Tourism Corporation (IRCTC) decided to make lemonade – and sell it to corporate clients.  The railway ministry made a policy decision in 2010 that the Indian Railways would gradually take over the management of train and station catering from IRCTC. The railways would also manage the contracts that IRCTC had signed with vendors. IRCTC, a ‘miniratna’ company, was set up in 2001, specifically to cater to railway passengers. But it now caters on just 39 trains, down from some 300 trains in 2010 – a loss of almost Rs 200 crore worth of business.  In 2011/12, IRCTC’s total income fell to Rs 554 crore from Rs 765 crore in 2010/11, and profit before tax fell to Rs 77 crore from Rs 130 crore. Income from IRCTC’s railway catering remained the same at around Rs 198 crore, but income from catering to nonrailway clients – such as companies and ministries – was Rs 10.8 crore in 2011/12, up from Rs 6.64 crore the previous year.

IRCTC had its own kitchens, as well as some that were operated by licensees. All licensee kitchens and part of the departmental ones have been transferred to the railways. So now, besides catering on 39 trains (including 23 Durontos), IRCTC runs three base kitchens, which supply food to trains and stations, 14 Jan Aahara self-service cafeterias and 10 refreshment rooms which serve light snacks. It also continues to cater to offices and institutions such as the external affairs and finance ministries, and the Indian Institute of Technology, Delhi.

Over the past year, IRCTC’s corporate client list has grown. It now includes Samsung, the Aditya Birla Group, HCL Technologies, Jaipuria Institute of Management, Lava Mobiles and Tata McGraw-Hill. “Our vision is to provide hygienic and high quality meals,” says Sudhir Warrier, Joint General Manager, IRCTC. “We want corporates to see us as benchmark of quality.”

Perhaps IRCTC would have had to take the corporate route anyway , as the railway catering business was not breaking even, according to Warrier, who also heads the company’s Noida facility. This business incurred a loss of Rs 53.6 crore in 2011/12. An IRCTC official, who wishes to remain unnamed, says the company was losing almost Rs 6 per meal in the railway catering business, even though IRCTC was profitable overall.

The kitchen in Noida, near Delhi, was built with an initial investment of around Rs 6.5 crore. It uses imported equipment and is on par with kitchens that cater to airlines, with machines that cut up to 200 kilos of vegetables and crank out 1,000 chapatis in an hour. Work starts at 5.30 am and goes on until 7 pm. The staff of 120 – mostly graduates of hotel management institutes – includes 30 chefs. IRCTC has its own delivery vans that distribute meals in the National Capital Region.

The price of a meal varies between Rs 50 and Rs 70. “We get different demands from customers,” says Sumesh Surendran, head of production at the kitchen. We serve idli-vada to continental to Chinese.” The kitchen will soon complete a year, and has already earned around Rs 15 crore in revenues. “We look to break even this year, but we are not looking at profit margins right now,” says Warrier. The kitchen, which produces 10,000 meals a day, is increasing its capacity to 25,000. Its target is a turnover of Rs 35 crore by 2015.

IRCTC is also setting up such ‘food factories’ in the other metros. “We plan to start the Chennai facility this year, Kolkata in 2014 and Mumbai in 2015,” says Warrier.

Samsung employees are pleased with their new caterer. “We thought it would be like railway catering, but it turned out to be very good. It has a homely taste,” says Santosh Upadhyay at Samsung Noida Campus. Other clients endorse his view. “We chose IRCTC because of its brand name, and the rates are on par with the market rates,” says Parvez Sajid, Head of Administration, Lava Mobiles. Rita Nayyer, Assistant Manager, Administration, at Tata McGraw-Hill, agrees. “Our previous supplier didn’t directly supply the food. It used other vendors. IRCTC uses its own employees… They are all diploma holders and know how to behave with customers,” she says.

Arvind Singhal, Chairman of retail consultancy Technopak Advisors, however, sounds a note of caution. “They will face tough competition from regional players,” he says. “They were a monopoly. They are not used to competition.” He adds that IRCTC would do well to focus on the National Capital Region, rather than expand into other cities.

IRCTC also plans to step up bottled water production. At present, its Rail Neer brand of water is only sold on trains and at stations. Its three bottling plants are in Chennai, Patna and Nangloi in Delhi. A fourth is coming up in Maharashtra.

Pradeep Kundu, Joint General Manager, Public Relations, says: “We plan to start six more plants in the next five years.”