Low cost airline IndiGo’s parent InterGlobe Aviation will launch its initial public offering (IPO) towards the end of this month, the company said its in red herring prospectus. The IPO, to open for subscription on 27 October, will see a mobilization of INR25 billion. While InterGlobe Aviation IPO’s price band is understood to have been fixed in the range of INR700-765 per share, a discount of 10% will be provided to eligible employees. Final pricing will be revealed at a later date. The offer comprises of fresh issue of INR12.72 billion and an offer for sale of up to 26.11 million shares. Draft red herring prospectus (DRHP) in this regard was filed with market regulator Securities and Exchange Board of India (SEBI) on 30 June 30 and received regulatory clearance on 11 September. The promoters of the company include Rahul Bhatia, Rakesh Gangwal, and Interglobe Enterprises. Barclays Bank, Kotak Mahindra Capital Company and UBS Securities India are managing the issue.
Usage of Funds
The proceeds of the issue shall be used for retirement of outstanding lease liabilities, acquisition of aircrafts, purchase of ground support equipment and for general corporate purposes. According to the red herring prospectus filed by InterGlobe Aviation, it plans to use INR11.6 billion for retirement of outstanding lease liabilities and consequent acquisition of aircrafts. InterGlobe Aviation has earmarked another INR342.6 million for purchase of ground support equipment while the rest will be used for general corporate purposes. More details on this are available here.
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InterGlobe Aviation IPO: Historical backdrop
Started by Rahul Bhatia and Rakesh Gangwal in 2006, the low-cost airline has become India’s largest airline in market with strong growth in passenger numbers. The company plans to expand its fleet size to 111 and 137 by FY 2016 and 2018 respectively. The aviation giant is raring to capture India’s budding market by its order of 250 Airbus A320 neo jets.
InterGlobe Aviation’s net profit catapulted four times from INR4.73 billion in FY 2014 to INR13.04 billion in FY 2015. Besides Wadia Group-promoted GoAir, InterGlobe Aviation is the only domestic carrier that is not marked with red in its financial statements. InterGlobe Aviation IPO will be the first airline IPO in India since 2006 when Deccan Aviation got listed. Prior to that, Jet Airways had raised INR19 billion from its IPO in 2005. It will also be India’s biggest market offering since 2012 Bharti Infratel’s INR41 billion public issue.
India’s IPO market has warmed up this year with 16 issues so far raising INR75 billion collectively. It is a fair rise as compared to previous years with INR14.79 billion and INR16.45 billion in 2014 and 2013 respectively.
Successful subscription of the Coffee Day IPO indicates risk appetite in the market is increasing and thus, InterGlobe Aviation IPO is likely to more popular with investors.