Home >Companies >M.D. Mallya likely to join IndiGo board amid IPO talk

New Delhi: India’s largest airline by market share IndiGo, majority-owned by InterGlobe Enterprises Ltd, has approached retired Bank of Baroda (BoB) chairman M.D. Mallya to become the first outsider to join its board amid renewed speculation that the privately held budget carrier may be preparing to sell shares to the public soon.

“He (Mallya) will join them as a board member in next one or two months," said a person aware of the development who declined to be named.

A second person aware of the development confirmed that Mallya was expected to join the board. He too asked not to be named. IndiGo declined to comment on the matter.

“I am on the board of Emami and India Infradebt. I am (also) an advisor to Tata Capital," Mallya said in a phone interview on the positions he has taken up since retiring from Bank of Baroda in 2011, while declining to comment on the possibility of joining the IndiGo board.

Emami Ltd is a consumer products maker and India Infradebt Ltd is an infrastructure financier promoted by ICICI Bank, Bank of Baroda, Citicorp Finance (India) Ltd and Life Insurance Corporation of India. Tata Capital, which offers commercial finance, personal loans and investment services for wealth management, is an arm of the Tata group.

There has been speculation of IndiGo raising funds through an initial public offering (IPO), which would make it India’s fourth listed airline after Jet Airways (India) Ltd, SpiceJet Ltd and the grounded Kingfisher Airlines Ltd.

Aviation consulting firm Centre for Asia Pacific Aviation, or Capa, said in an email on Friday it expects the airline to list in the third quarter of this fiscal year and the process will “include appointing bankers, due diligence, agreeing on valuation, listing premium and draft prospectus etc".

To be sure, there has been speculation in the past too about an IPO by IndiGo. To consider an initial share sale, IndiGo hired five investment bankers—JM Financial, Credit Suisse Group AG, Citigroup Inc., UBS AG and Morgan Stanley—in 2010, Mint reported on 4 October, 2010. The plan did not materialize.

“Is it (an IPO) gonna happen tomorrow? No, I don’t think so. In overtime maybe... Is it imminent? I don’t think so," promoter and managing director Rahul Bhatia said in November. Documents show Rahul Bhatia’s InterGlobe Enterprises Ltd holds 51.2124% of the paid-up capital of IndiGo, US-based Rakesh Gangwal’s Caelum Investment LLC owns 47.883%, Shobha Gangwal 0.473%, Asha Mukherjee 0.488%, Rohini Bhatia 0.003% and Rahul Bhatia’s father Kapil Bhatia 0.016%. Rahul Bhatia, in his individual capacity, also holds 0.013% as of March 2013.

Former banker Mallya, who is credited with increasing Bank of Baroda’s retail footprint and has been chairman of the Indian Banks’ Association, the banking industry lobby, will be the first outsider to join IndiGo’s board if he accepts the offer.

IndiGo’s four board members, according to IndiGo documents reviewed by Mint, are Kapil Bhatia, Rahul Bhatia, Aditya Ghosh and Anil Parashar.

Both Ghosh, who is the president of IndiGo, and Parashar, who is the president of Interglobe’s information technology subsidiary, have worked with Bhatia for over a decade.

Approaching a banker to be a board member may be indicative of plans to raise funds, said Steve Forte, the New York-based former CEO of Jet Airways. “Perhaps a banker on the board will help facilitate negotiations with financial institutions to obtain further financial assistance," he said.

Forte said IPOs should wait for economic growth, which slumped to sub-5% levels in each of the previous two financial years, to rebound.

“Successful IPOs must be carefully planned and the market conditions must be just right. It would be a much better timing for an IPO to wait until the economy improves and gains investors’ confidence," Forte said, “Hopefully in one year for IndiGo"

IndiGo, which has a 32% share of the Indian air passenger market, announced a six-fold increase in profit to 787 crore in 2012-13, the last year for which it has declared results. Its closest low-fare rival SpiceJet reported a loss of 191 crore and Jet Airways a loss of 779.80 crore for 2012-13.

Competition is intensifying in India’s airline industry. Tata Sons Ltd this month launched budget carrier AirAsia India in partnership with Malaysia-based Air Asia Bhd and Arun Bhatia of Telestra Tradeplace Pvt Ltd.

Tata Sons is also preparing to launch a premium, full-service airline in partnership with Singapore Airlines Ltd in October.

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