Low cost airline player IndiGo is likely to submit its draft red herring prospectus (DRHP) with the capital market regulator SEBI later this month. According to reports, the company may offload 25% shareholding and raise up to INR2,000-2,400 crore through the IPO. The proceeds will be used to fund fleet expansion. The company is reportedly considering acquiring some long-haul aircrafts to service destinations in North and South America, Europe, Australia and Africa among others. This is aimed at leveraging its healthy balance sheet and profitable operations to gain entry in international routes as and when domestic carriers are allowed to do go by the regulator.
Moneycontrol has learnt that Citigroup, Kotak, Morgan Stanley, JP Morgan Chase, UBS, and Barclays have been roped in as book runners for the IPO. That’s quite a long list but telling that this would be the biggest IPO in the country’s civil aviation sector. IndiGo shares could start trading on the bourses by the end of the year.
Investors can expect the company to move fast this time as it let a listing opportunity slip away in 2010 and subsequent fuel price increases practically dashed such prospects. With benign global oil prices, a considerable advantage over competitors, profitable operations and a lean balance sheet, it is arguably the best time for a stock market listing. Delhi-based Rahul Bhatia’s InterGlobe Enterprises holds over 51% stake in IndiGo while India-born US citizen Rakesh Gangwal’s Caelum Investment LCC holds 48% stake.
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.
Interestingly, airport operators GVK, GMR are also hoping to cash the IPO boom. Considering the encouraging market conditions, we may get to see public offerings of these companies this year.