Mumbai: The 3,130 crore initial public offering (IPO) of InterGlobe Aviation Ltd, owner of India’s largest and most profitable airline IndiGo, was subscribed fully on Wednesday, the second day of share sale.

The largest share sale in the country since 2012 values InterGlobe at around $4 billion.

Analysts are expecting more interest from the investors, citing the underlying prospects in the Indian aviation story and the company’s profitable performance, but they are not expecting a hot listing of the shares post share sale on the exchanges.

The portion of shares set aside for qualified institutional buyers (QIBs) was subscribed 5.15 times on the second day of the sale, according to data updated by BSE at 5pm on Wednesday.

According to the data, the IPO issue had 1.55 times subscription.

However, only 19% of the shares set aside for individual retail investors were subscribed, according to the data.

IndiGo, the only domestic airline to be consistently profitable since 2009, has fixed a price band of 700-765 for the IPO that will close on 29 October.

Most of the bids came in at the upper end of the price band, according to the data.

On Monday, InterGlobe finalized the allocation of 10.87 million equity shares at 765 per share, adding up to 832.03 crore, to anchor investors.

The anchor investors include Fidelity Investments, GIC Pte Ltd, Acacia Partners LP, HDFC Trustee Co. Ltd, DB International (Asia) Ltd, DSP BlackRock India Tiger Fund, Kuwait Investment Authority Fund, Merrill Lynch Capital Markets Espana SA SV, Credit Suisse Singapore Ltd, Harvard Management Co. Inc., Sundaram Mutual Fund and Goldman Sachs India Fund.

The anchor book is that portion of the IPO that bankers can allot to institutional investors on a discretionary basis. Anchor book subscription opens a day before the launch of an IPO and is a barometer of institutional investor interest.

“High net worth individuals (HNIs) may come on last day. It is a good quality IPO. The firm has the largest market share in the sector, which is likely to grow very well in India," said Amisha Vora, joint managing director of Prabhudas Lilladher Pvt. Ltd.

IndiGo had a 36.5% share of the domestic air travel market in September, according to data published by the Directorate General of Civil Aviation (DGCA) last week.

“For FY17, if they continue with the strategy of distributing huge dividends, the dividend yield may work out to more than 5%, which is a good thing," said Vora. InterGlobe has consistently paid dividends to its shareholders. In 2010-11, it paid 490 crore; in 2011-12, it paid nothing; in 2012-13, it paid 549 crore; in 2013-14, it paid, 378 crore; in 2014-15, it paid 1,080 crore; and in 2015-16, it paid an interim dividend of 1,003 crore (this information is from its draft red herring prospectus).

“I would think it will be a reasonably good listing. There can’t be a runaway kind of situation for this kind of IPO. But, I think, it will provide consistent returns to shareholders," added Vora.

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

India has the fastest growing domestic aviation market in the world, ahead of China and the US. The number of passengers increased 20.2% in the eight months ended 31 August from a year ago, owing to more flights, fare cuts and faster economic growth, according to the International Air Travel Association.

India is also one of the most under-penetrated aviation markets in the world, with around 350 aircraft plying domestic routes.

“I think it is a wonderful company, though it’s coming from the airline industry. It is an oasis in sort of a bankrupt sector. The oil price decline has given disproportionate gains to earnings," said Raamdeo Agrawal, joint managing director of Motilal Oswal Financial Services Ltd. “I don’t think the issue will see a very hot listing as it has priced it to perfection," added Agrawal.

The grey market seems to be dull for IndiGo. Grey market is where once HNIs queued up to fork out a premium to buy shares in firms ahead of their listing.

Grey market activity was very limited, given the lacklustre response from HNIs and retail investors, dealers said. At the end of Day 2, the issue saw a mere 4% subscription from HNIs and 19% subscription from retail investors for the issue size reserved for them, the data showed.

A few trades with a premium in the range of 11-13 took place in the grey market, a head of brokerage in the know said, requesting anonymity.

The grey market is driven by HNIs who put in bids to subscribe to large chunks of an IPO, far in excess of the portion reserved for such investors. This pushes the overall subscription levels for the issue and, in turn, lures investors to buy shares in the grey market at a premium.

This is the second high profile IPO in a month. On 16 October, Coffee Day Enterprises Ltd, which runs India’s largest cafe chain Café Coffee Day, had received investor orders for 1.8 times the stock it offered in a 1,150 crore initial share sale.

Close