Budget airline IndiGo’s promoters have changed the company’s shareholding structure to comply with the government’s rules and allow foreign investors to participate in the upcoming IPO. India-born US citizen Rakesh Gangwal – whose Caelum Investment LCC held nearly 48% stake in the carrier – has transferred Caelum’s shareholding to himself. The transaction follows the merger of Caelum Investment with Interglobe Aviation in recent months, IndiGo said in a filing with the Registrar of Companies. Interglobe Aviation is the operator of the airline.
According to IndiGo’s filing with the corporate affairs ministry in April, the board of IndiGo had approved the “allotment of shares to the members of Caelum Investment LLC, pursuant to implementation of the scheme of amalgamation.” Accordingly, 147,000 shares of INR1,000 each were allotted to Gangwal.
According to government rules, foreign investment in domestic airlines can’t exceed 49%. However, Non Resident Indians (NRIs) can hold up to 100% stake in an airline. With Caelum Investment holding close to 48%, it would have been impossible for foreign investors to participate in the IPO, said Business Standard. With Caelum Investment’s stake now owned by Gangwal, the regulatory issue has been taken care of. The transaction has not impacted the carrier’s capital structure except the ownership change.
Gangwal is a former chief executive of US Airways, and is often credited with IndiGo’s success. The low-cost carrier is widely believed to be filing draft red herring prospectus (DRHP) with capital market regulator SEBI later this month for its IPO. It is learnt that Citigroup, Kotak, Morgan Stanley, JP Morgan Chase, UBS, and Barclays have been roped in as book runners for the IPO that could raise up to INR2,000-2,400 crore.
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After starting operations in 2005/06, IndiGo has been a consistent performer – a key factor behind its success in recent years. The company is estimated to posted a profit of at least INR900 crore in the financial year 2014/15 amid high domestic traffic and lower input cost. It has a market share of 36% that is expected to grow beyond 50%, according to estimates of global aviation consultancy CAPA. Delhi-based Rahul Bhatia’s InterGlobe Enterprises holds over 51% stake in IndiGo.