IndiGo's Share Falls 4%, As Gangwal Family To Sell Stake Worth $450 Million Via Block Deal

Rakesh Gangwal, the co-founder of IndiGo, divested 4% stake in InterGlobe Aviation for about $450 million, with shares priced at ₹2,400 (5.8% discount). This caused a 4% drop in IndiGo's share price.

IndiGo Co-Founder Rakesh Gangwal to Sell 4% Stake

In a significant move, Rakesh Gangwal, the co-founder of IndiGo, India's largest airline, has revealed plans to sell approximately 4% of his stake in InterGlobe Aviation Ltd. This announcement comes as part of Gangwal's ongoing efforts to reduce his holdings in the company. The block sale, executed on Wednesday, is expected to generate up to $450 million (₹3,370 crores).

Over the past year, Rakesh Gangwal and his family have strategically executed stake sales to streamline their involvement in the airline. Notably, in September of the previous year, they divested 2.8% of their stake for ₹2,000 crore, followed by another 4% stake sale in February of the ongoing year, fetching ₹2,900 crore. These transactions have set the stage for the current stake sale.

The shares in question will be offered at a floor price of ₹2,400 each, reflecting a 5.8% discount from the closing price on the preceding Monday, which stood at ₹2,549. It's important to note that such secondary share sales typically involve pricing at a markdown relative to prevailing market rates. Moreover, the acquirer will be subject to a lock-in period of 150 days.

The block sale will be executed with Rakesh and Shobha Gangwal identified as the sellers. To facilitate this transaction, esteemed investment banks including Morgan Stanley, Goldman Sachs, and JP Morgan are actively involved, underscoring the significance of this move within the aviation industry.

Rakesh Gangwal's decision to reduce his stake is preceded by his resignation from the InterGlobe board in February of the prior year and said that he would sell his take over the next five years. Currently, he holds a stake of more than 29.72% in the company. In contrast, Rahul Bhatia, the co-founder of IndiGo, and his family maintain a majority ownership stake exceeding 38.05%.

The timing of this move is noteworthy, given the recent performance of IndiGo's shares. Over the course of the year, the share price has surged by 21%, climbing from ₹2,007 in January to its current value of ₹2,548.35. As of the previous trading session, InterGlobe Aviation's market capitalization stood at ₹95,113 crore.

Market Reaction

The market has already begun to respond to this impending transaction. Following the news of the stake sale, IndiGo's share price experienced an initial decline of over 4% during early trading on Thursday. This decline led to a share price of ₹2,425.00 apiece on the BSE, illustrating the immediate impact of the market's response to the development.

Budget Airline Achieves Historic Q1 FY24 Profit Growth

In a remarkable turnaround, the budget airline has reported a substantial Q1 FY24 net profit of ₹3,091 crore, a notable shift from last year's loss of ₹1,064 crore. This marks the airline's highest-ever quarterly profit, attributed to operational excellence, strategic execution, and favorable market conditions.

The Q1 FY24 profit surge is a remarkable 236% increase from the previous quarter's profit of ₹919.8 crore. Net revenue from operations also surged to ₹1,668.3 crore, 29.7 % YoY rise from ₹1285.53 crore in Q1 FY23.