IndiGo preps IPO

Dino D'Amore
By Dino D'Amore September 15, 2015 20:06

IndiGo preps IPO

IndiGo’s parent company, InterGlobe Aviation, has received formal approval from market regulator Securities and Exchange Board of India (Sebi) for its Rs 2,500 crore (approx. US$475 million) initial public offer (IPO). Indigo plans to issue fresh shares worth Rs 1,272 crore, with an equivalent amount being raised via the sale of up to 3.01 crore shares by its existing shareholders.

Citigroup, JPMorgan India, Morgan Stanley, Barclays, UBS Securities India and Kotak Mahindra Capital Company are managers for the share sale.

IndiGo has posted a profit for the past seven years; during the year ending March 31, 2014, it earned a profit of Rs 317 crore (approx. US$38 million), which increased four-fold to Rs 1,304 crore in the last fiscal year – its highest annual profit.
The airline intends to use the IPO proceeds to funds its aircraft delivery stream, retiring old debt as well as purchasing some ground service equipment and for general corporate purposes.

Indigo is due to take delivery of the first of its 180 A320neos at the end of the year.
Speaking to local media, IndiGo president Aditya Ghosh, explained that the timing of the IPO was due to its seven-year profitable track record, and the fact that the airline is expanding: “We are building an airline for the next 15-20 years and we are making decisions that will have impact for many more years,” he said. !So, as we become bigger, as we move into the future, when we need, we would have access to right funding mechanisms, capital markets and more options.”

Ghosh says that the main goal is for the airline to raise $200 million from the primary proceeds, saying that the balance will be made by its existing shareholders, the price at which it sells will be determined by the market on that particular day.

As previously reported by this news service, Indigo’s shareholders tweaked the airline’s shareholding structure to enable the IPO to take place, which opened the door to foreign investment as Rakesh Gangwal brought his 47.88% shareholding into the NRI (non-resident Indian) category. This holding had been considered as foreign direct investment since it was held through a foreign company, Caelum Investment. Indian law allows a foreign company or airline to own up to 49% in a domestic airline. However, an NRI is allowed to hold 100% in an airline. So by making this change, IndiGo can potentially bring in a strategic foreign investor at some stage after the IPO, possibly Qatar Airways (Rahul Bhatia holds 51.12% in the company).

However in the same most recent interview, Ghosh ruled out selling a large stake to a foreign airline, which he said he “never wanted to” and cannot now the airline is poised to be listed.

He did confirm that the airline is in discussions with Qatar Airways regarding “simple marketing partnerships”.

Other shareholders that are selling all of their stake through this IPO are: the airline’s former and first CEO, Newton Bruce Ashby, and its current chief commercial officer, Sanjay Kumar.

Dino D'Amore
By Dino D'Amore September 15, 2015 20:06