IndiGo IPO likely on 26 October; price band seen at Rs400-418

Indigo expected to file IPO documents with RoC on Thursday

Mumbai: The 2,500 crore initial share sale of InterGlobe Aviation Ltd, the owner of India’s biggest and most profitable airline IndiGo, is likely to hit the capital market on 26 October.

The airline, the only one in India that has been consistently profitable since 2009, will sell shares between 26 and 28 October at between 400 and 418, two people aware of details of the share sale said on condition of anonymity.

“The airline is expected to file IPO (initial public offering) documents with Registrar of Companies on Thursday for a formal go-ahead for the share sale. On Friday, the airline is expected to finalize the price band (for the sale)," one of the persons added.

The second person said the firm will consider all external market factors before finalizing the IPO.

IndiGo was seeking a pre-money equity valuation of about 14,500 crore and an enterprise value of 17,000 crore, Mint reported on 1 July.

The airline, which is trying to tap the capital market at a time when workers receive annual bonuses and incentives, filed its draft red herring prospectus with the Securities and Exchange Board of India on 30 June.

Since 1 July, the Sensex has lost 3.6% from 27,780.83 points to 26,779.66 points.

The 1,150 crore share sale of Coffee Day Enterprises Ltd (CDEL), which owns the popular coffee chain Café Coffee Day, was off to a slow start on Wednesday with the issue witnessing subscription of 0.14 times. Many brokerages and wealth managers say the issue is expensive at between 316 and 328 a share.

The bankers to the IndiGo issue are Citigroup Global Markets India Pvt. Ltd, JP Morgan India Pvt. Ltd and Morgan Stanley India Co. Pvt. Ltd. The other bankers to the issue are Barclays Bank Plc., Kotak Mahindra Capital Co. Ltd and UBS Securities India Pvt. Ltd.

IndiGo declined to comment.

Experts are betting big on IndiGo, citing its healthy financials.

“Looking at the current market conditions, the IndiGo IPO will be oversubscribed several times. IndiGo has the largest market share in the domestic market, very good safety record and competent management," said Satish Modh, director of the Institute of Management Studies and Research at Vivekanand Education Society.

In September, IndiGo reported a record net profit of 1,304 crore for the year ended 31 March—a fourfold jump over the previous year—as it benefited from higher passenger traffic and lower jet fuel costs ahead of the initial share sale. The company, which returned a net profit of 317 crore in 2013-14, saw a 25% rise in revenue to 14,320 crore in 2014-15 from 11,447 crore the previous year.

Profit before tax was 1,847 crore in the year, the company said in a submission to the Directorate General of Civil Aviation, the aviation regulator.

“Low aviation fuel prices have made the airline business lucrative. I don’t see a surge in the fuel prices for couple of years. Further, IndiGo has established a very strong brand in the airline industry. The money raised can be used for its international expansion and also establishing allied support structure like a maintenance organization and training establishment," Modh said.

Not everyone is convinced it will be smooth sailing.

The second person said the market has changed since IndiGo filed its papers.

“The airline is working on details of discounts to woo retail shareholders," he added.

A final decision will be taken on Friday, he said.

On 15 August, IndiGo confirmed an order to buy as many as 250 Airbus A320neo single-aisle jets. At list price, the order is worth $26.5 billion.

In 2005, IndiGo placed an order for 100 A320s, all of which have been delivered. IndiGo has so far ordered 530 aircraft from the A320 family, out of which it has taken delivery of 100 planes.

IndiGo, which had a 33.8% share of domestic passenger traffic in the year ended 31 March, currently operates a fleet of 97 planes and offers 648 flights a day.