IndiGo shares skid 4% amid block deal buzz; Bhatia promoter entity likely seller

Shares of InterGlobe Aviation, which runs low-cost carrier IndiGo, dipped over 4% in opening trade on Tuesday amid a report of stake sale by Rahul Bhatia, the promoter and managing director of the airline. As per report, Bhatia is looking to sell around 2% stake in the company through his entity Interglobe Enterprises Private Ltd via block deal. Interglobe Enterprises Private currently holds a 37.75% stake in IndiGo, as per the latest data available on the exchange.

The floor price for the deal is ₹4,266 per share, a discount of a 6.5% to Monday’s closing price of ₹4562.55 apiece, as per the report.

Snapping two sessions gaining streak, IndiGo shares opened 3.3% lower at ₹4,409.95 against the previous closing price. The most valued aviation stock has risen over 6% in the past two sessions, hitting 52-week high of ₹4,610 in intraday trade on June 10, 2024.

Extending opening losses, shares of IndiGo dropped as much as 4.4% to ₹4,361 amid strong volume, with more than 80 lakh shares changing hands over the counter in the first 15 minutes of trade. The name of buyers and sellers were not ascertained immediately. The market capitalisation of the aviation stock slipped to ₹1.71 lakh crore.

In the last one year, IndiGo shares have witnessed strong rally, with the share price doubling to ₹4,610 from its 52-week low of ₹2,331 touched on June 13, 2023. The counter has risen 50% in six months; and 7.5% in a month.

This is the first time in many years that Bhatia is looking to offload some stake in the company, who co-founded IndiGo with Rakesh Gangwal in 2005. In February 2022, Gangwal, who controlled 36.6% stake in the company, stepped down from the airline’s board after years of dispute with Bhatia and announced to reduce stake in the company over the next five years. In the last two years, Gangwal pared stake in the airline in multiple tranches, bringing down his holding to 6%. Recently in March this year, he offloaded a 5.8% stake in the airline through a bulk deal and raised ₹6,785 crore.

For the fourth quarter ended March 31, 2024, IndiGo posted a consolidated net profit of ₹1,894.82 crore, up 106% compared to ₹919.20 crore in the year-ago period. Sequentially, however, profit dropped 36.8 per cent from ₹2,998.12 crore. 

The revenue from operations grew 25.9% year-on-year (YoY) to ₹17,825.27 crore, from ₹14,160.6 crore in the same period last year. Sequentially, revenue was down 8.4% from ₹19,452.14 in Q3 FY24.

Indigo, which holds around 60 per cent of the domestic aviation market share,  placed an order for 30 Airbus A350-900 widebody aircraft in April this year. The airline has purchase rights for an additional 70 Airbus A350 Family aircraft “for possible future needs under certain conditions”. With this order, IndiGo will become the third Indian airline to operate widebody aircrafts after Tata Group’s Air India and Vistara.

IndiGo plans to introduce wide-body aircraft to its fleet and has placed an order for 30 Firm Airbus A350-900 aircraft, which will enable the airline to expand its network. The deliveries of the aircraft, powered by Rolls Royce’s Trent XWB engine, are expected to start from 2027. As per the company, the exact configuration of the aircraft will be decided at a later stage.

Currently, IndiGo operates over 350 aircraft. Last year, in June 2023, IndiGo placed the largest ever single aircraft order by any airline for 500 aircraft with Airbus. With that, the outstanding orderbook of A320 Family aircraft stands at almost 1,000 aircraft which are yet to be delivered well into the next decade. This IndiGo order-book comprises a mix of A320NEO, A321NEO and A321XLR aircraft.

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