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Nine investment banks to bid for Rs 2,500 crore IndiGo IPO; to be the biggest ever in India's aviation industry

The banks include Bank of America Merrill Lynch, JP Morgan, Goldman Sachs, Morgan Stanley, Citigroup, Barclays, UBS, Credit Suisse and BNP Paribas.

Updated: Jul 03, 2014, 10.41 AM IST
MUMBAI: About nine investment banks were in Paris this week to bid for the $350 million (Rs 2,100 crore) to $400 million (Rs 2,500 crore) initial public offering of IndiGo, likely to be the biggest ever IPO in India's aviation history, said two sources in the know.

The banks include Bank of America Merrill Lynch, JP Morgan, Goldman Sachs, Morgan Stanley, Citigroup, Barclays, UBS, Credit Suisse and BNP Paribas.

"The bids were presented on Monday and Tuesday. The management is keen to list by the end of current financial year," an investment banker said.

"The company is likely to appoint bankers for the $400 million issue by end of July," another investment banker said.

"The company is being valued at around $1.8 billion (Rs 10,800 crore)-$2 billion (Rs 12,000 crore). IndiGo didn't immediately respond to an emailed query.

Other experts said the valuation could even be higher.

"Its revenue last year was over Rs 9,000 crore. Simplistically speaking, one can look at a valuation of between Rs 15,000 crore and Rs 18,000 crore," said an aviation consultant.

"The financial health, performance and valuation of other carriers cannot be a benchmark for IndiGo. It has over a longish period of sustainable growth and profitability proven it is in a different league than others. The only concern is increasing competition from other carriers such as AirAsia," said Prithvi Haldea, chairman of Prime Database, which tracks India's primary market.

SpiceJet's current market cap is Rs 1,033.09 crore while Jet Airways has that of Rs 2692.05 crore

In the financial year ended March 2013, IndiGo posted a six-fold increase in net profit to Rs 787 crore while revenue rose 65% to Rs 9,458 crore.

IndiGo has weathered the slowdown in Indian aviation much better than its peers two of whom-Jet Airways and SpiceJet--reported record quarterly or annual losses during the last fiscal year.

The airline has been a market leader since August 2012, when it toppled Jet Airways. It controlled 31.7% of the market in May, according to figures from DGCA, the aviation regulator.

It has a fleet of 79 Airbus A320 planes with an orderbook of 186. It flies close to 500 daily flights connecting 36 destinations.

Experts said profit in the just ended fiscal year may have fallen, due primarily to the price wars in the January-March quarter which would have dented yields.

Sydney-based CAPA-Centre for Aviation said Indigo may place a big aircraft order before its IPO.

"The offer is likely to preceded by a strong statement about its future growth prospects with IndiGo expected to place another large order for 200-250 aircraft at Farnborough in Jul-2014 to meets its equipment requirements post-2025," it said in a recent report.

As of last year, Rahul Bhatia owned InterGlobe Enterprises held slightly over 51% stake in IndiGo while US-based Rakesh Gangwal's Caelum Investment LLC owned 48%. Bhatia and his father Kapil Bhatia themselves owned some shares in the company.

Analysts said Gangwal, being a U.S. citizen will likely have to dilute his stake in the offer.

Globally, low fare carriers have seen some successful IPOs. When EasyJet debuted on the London Stock Exchange in November 22, 2000 its stock rose 10% lifting the carrier's market value to £854.7 million ($1.2 billion).

Malaysian carrier AirAsia's IPO on November 10, 2004 was oversubscribed by 130%.

But with the overall global economic downturn and a resultant lag in travel, there has been a weak response to recent IPOs.

Last year, AirAsia X had the second worst market debut among Malaysian companies that year with its share price closing at the same level as the offer price on the day of the IPO.

In India, Jet had a blockbuster debut on the bourses in 2005, with its scrip opening at Rs. 1,155, at a premium to issue price of Rs. 1,100 per share, soaring to Rs 1,338.90 and closing at Rs 1,293.90.

The shares have fallen 80% since then and closed at Rs 260.75 apiece on Wednesday.

Kingfisher Airlines had planned an IPO in 2006 but was unsuccessful in its fundraising initiatives until it reverse-merged with low fare carrier Air Deccan to list on the stock exchanges.

Also Read

IndiGo IPO oversubscribed, but retail response tepid

Is IndiGo's IPO priced too high?

Rakesh Jhunjhunwala makes huge bid in IndiGo IPO

IndiGo IPO to 're-rate' domestic aviation sector: CAPA

IndiGo IPO sees promising start, QIB quota oversubscribed

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