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Most of the analysts have a positive view on the IPO of InterGlobe Aviation – the parent of India’s biggest airline IndiGo. The INR 30-billion IndiGo IPO is priced between INR700-765 per share. Following some changes, the offer for sale (OFS) portion of the IPO was decreased from 26.1 million shares to present 23 million shares. The issue starts from 27 October and ends 29 October. InterGlobe Aviation issue will be the biggest IPO of the year, superseding Coffee Day Enterprises’ recently concluded INR11.5-billion-IPO.
This low-cost airline is India’s largest airline with 34% market share based on volume. InterGlobe Aviations has been the only Indian airliner with consistent profits for past seven years. From the current tally of 97 aircrafts, InterGlobe Aviations’ fleet size is expected to expand to 111 and 137 by FY 2016 and 2018 respectively.
Issue details are as follows:
|IPO dates||27-29 October 2015|
|Price Band||INR700-765 per share|
|Issue Size||INR30 billion|
|Fresh Issue||INR12.72 billion|
|Offer for Sale||23 million shares|
|Minimum Bid||15 shares|
|Lead Managers||Barclays Bank, Kotak Mahindra Capital Company and UBS Securities India|
Analysts at Angel Broking have recommended SUBSCRIBING to the InterGlobe Aviation IPO stating factors like its cost competiveness, capitalization on highly underpenetrated Indian air travel industry and soft crude prices along with lower Aviation Turbine Fuel (ATF) working for the benefit of the company. InterGlobe has a proven management track record with regular fleet addition with sustainable profitable business model. Its young fleet is mostly on short term operating lease which makes the company achieve reliable performance and lower maintenance costs (3.0% of sales as compared to SpiceJet with 12.9%). The valuation is justified owing to the underpenetrated Indian air travel market it operates on.
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Aditya Birla Money too recommends investors to SUBSCRIBE to IndiGo IPO. The brokerage house notes that IndiGo is India’s only profitable airline for the past seven years despite operating in a market overwhelmed with high costs and taxes. It is India’s third largest by fleet size (88) and largest in fleet orderbook (180). IndiGo was the fastest growing carrier in India in terms of ASK growth with 193.1% between CY2010 and CY2014, followed by GoAir (103.4%) and SpiceJet (73.3%). IndiGo is valued at 30% premium to global peers at expected 14.5x FY17 earning per share at INR62 which makes the valuation of INR890 justifiable. Hence, investors have a green light to go for this investment.
Analysts at EliteWealth advocate investors to SUBSCRIBE strong brand recognition, largest market share and key market depth as its strengths. Factors to look out for include dependence of growth on effective application of its LCC model in present and future prospective markets, raw material cost factor and no guarantee of profit in new routes. The airliner earned total revenue of INR 114.32 billion in 2014 as compared to INR 94.4 billion in 2013. Though the issue price looks expensive, but after discounting on industry growth, managerial performance and low cost model, the analysts recommend to subscribe the issue.