Disagreements between major shareholders can be an expensive affair. Take the case of InterGlobe Aviation Ltd, which runs IndiGo, India’s largest airline.

Reports of a tussle between the airline’s two largest shareholders made the IndiGo stock nosedive on Thursday. By the end of the day’s trading session, it had lost nearly 5,600 crore, or about $800 million.

For perspective, that amounts to about 70% of the market capitalization of one of IndiGo’s competitors, SpiceJet Ltd.

To put it simply, investors are worried.

“This is a clear negative for the stock in terms of the anticipated paralysis in decision making that can take place if the scenario worsens," said an analyst, requesting anonymity. If the reported battle lengthens, it will impact the airline’s growth prospects. Of course, the fact that IndiGo is the market leader means the aviation sector as a whole can suffer a setback.

The silver lining in the dark cloud is that it is in the best interests of the promoters to thrash out a deal quickly and protect the value of their investments. After all, most of their wealth is tied to their holdings of the IndiGo stock and, if prolonged uncertainty means greater losses for the stock, they end up being the biggest losers. At current prices, the value of the combined promoter holdings is more than 42,000 crore.

But that may be a thin silver lining around a thick dark cloud. After all, who wants to bet on rationality prevailing in the midst of a battle for control over India’s largest airline?

The flurry at the top comes at an interesting juncture for IndiGo and the aviation industry. Jet Airways (India) Ltd recently shut operations, throwing open new opportunities for other airlines.

“With India exhausting bilateral flying rights on most short-haul destinations, vacation of slots by Jet is a positive for airlines, such as IndiGo, SpiceJet and Vistara, who are all aspiring to ramp-up their international operations," wrote Garima Mishra of Kotak Institutional Equities in a report on 18 April.

Investors have been pricing in these gains, as is visible in the chart alongside. So far this calendar year, IndiGo shares have beaten the Nifty 100 index by a wide margin. In fact, the stock has doubled from its lows seen in October 2018, as capacity constraints owing to Jet Airways’ troubles meant others airlines would gain in terms of market share and slots.

According to The Economic Times, while both major shareholders believe IndiGo can occupy the vacant slots left behind by Jet Airways, they differ on how to grab this opportunity.

From investors’ point of view, though, this may delay the gains they had priced in. Small wonder then, investors rushed to deboard the IndiGo flight on Thursday.

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