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Business News/ Companies / News/  IndiGo to tweak its promoter holding; IPO after March
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IndiGo to tweak its promoter holding; IPO after March

Restructuring of shareholding is yet another indication that IndiGo is readying for an IPO

IndiGo has a 32% share of the Indian domestic air passenger market with a fleet of 79 aircraft and an order book of about 186 Airbus aircraft that will join its fleet in phases till 2026.Premium
IndiGo has a 32% share of the Indian domestic air passenger market with a fleet of 79 aircraft and an order book of about 186 Airbus aircraft that will join its fleet in phases till 2026.

New Delhi: InterGlobe Aviation Ltd, the company behind popular low-cost airline IndiGo, is in the process of restructuring its shareholding in yet another indication that the airline is readying for an initial public offering (IPO).

One of the company’s promoters, Rakesh Gangwal, is in the process of converting his shareholding, now held through a foreign company, Caelum Investment Llc, into NRI or non-resident Indian holding, a person familiar with the matter said, asking not to be identified.

Indian law allows a foreign company to own up to 49% in an airline. It also allows foreign airlines to invest up to 49% in an Indian airline. An NRI is allowed to hold 100% in an airline.

Gangwal owns 47.883% in InterGlobe Aviation. The rest is held by IndiGo’s other promoter Rahul Bhatia’s InterGlobe Enterprises Ltd at 51.2124%. Shobha Gangwal holds 0.473%, Asha Mukherjee 0.488%, Rohini Bhatia 0.003% and Kapil Bhatia 0.016%. Rahul Bhatia, in his individual capacity, also holds 0.013%, according to documents reviewed by Mint.

Asha Mukherjee is Gangwal’s sister while Shobha is his wife. Rohini is Rahul Bhatia’s wife while Kapil Bhatia is his father who laid the foundations of what is now InterGlobe Enterprises in 1964.

Caelum is listed by IndiGo as a foreign corporate body, which means its stake is considered foreign direct investment (FDI).

The restructuring of the shareholding will enable IndiGo to sell shares to foreign institutional investors (FIIs).

The restructuring will “also, once and for all clear the doubts some people keep insinuating about the foreign investment in IndiGo", said a second person familiar with the developments at the company. This person, too, did not wish to be identified.

An IndiGo spokesperson declined comment.

The restructuring will help the company in its share sale, two other people said.

“The conversion from FDI to NRI (holding) will allow the company to bring in FIIs in the firm as NRI investment (in airlines) is allowed up to 100%," said a government official who asked not to be named.

“The NRI ownership should not be counted towards the 49% cap (on foreign direct investment in airlines) and therefore it can help with that much more headroom for FII QFI (qualified foreign investors) and FDI in an IPO," said Akash Gupt, executive director at audit and consulting firm PricewaterhouseCoopers.

The 49% ceiling is a composite one for airlines, he added, which means it includes both FDI and FII investments.

On 2 July, Mint first reported that IndiGo was appointing investment bankers for its share sale.

IndiGo, which announced a 787 crore profit in 2012-13, will launch an initial share sale “after March", the second person cited above said.

“The IPO will take a year. After March any time," the second person quoted above said.

The airline will announce a profit between 400-600 crore in 2013-14, a fourth person said, asking not to be identified.

Rival SpiceJet Ltd posted a record loss of 1,003.24 crore in 2013-14. Another competitor Jet Airways reported its biggest ever loss of 4,129 crore in the same period.

IndiGo has a 32% share of the Indian domestic air passenger market with a fleet of 79 aircraft and an order book of about 186 Airbus aircraft that will join its fleet in phases till 2026.

The privately held airline has also decided to appoint retired Bank of Baroda chairman M.D. Mallya to its board and the appointment could be announced soon, Mint first reported on 24 June. The move was seen by analysts as building more confidence in the airline and its profits ahead of listing.

“IndiGo remains the leading bright spot in Indian aviation. A potential IPO in 3Q2015 is likely to attract significant interest," said consulting firm Capa Centre for Aviation in its 2014-15 outlook report in June for IndiGo. “If it proceeds it is expected to be the largest ever aviation IPO in India. Capa estimates that IndiGo could raise $350-400 million from the flotation."

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. The government has allowed airline licences to six other firms.

The first person quoted above said the IPO is likely to be “small" in what has become a “huge enterprise" with revenues of about $2 billion. “The promoters are here for the long term."

Asit Ranjan Mishra contributed to this story.

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Published: 28 Jul 2014, 11:42 PM IST
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