InterGlobe Enterprises to Sell 2% Stake in Indigo at ₹3,293 Crore Amid Record Profits

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InterGlobe Enterprises Set to Sell 2% Stake in Indigo Amid Record-Breaking Profit Surge

Team FS

11/Jun/2024

Key Points:

InterGlobe Enterprises is set to sell a 2% stake in Indigo through block deals, valued at ₹3,293 crore.
Indigo reported a record profit of ₹8,172 crore for fiscal year 2024, with significant revenue and EBITDAR growth.
The sale reflects regulatory constraints on additional share sales by Bhatia for a minimum of one year.

InterGlobe Enterprises, the holding company owned by the Rahul Bhatia family, is poised to sell a 2% stake in the low-cost airline Indigo through block deals, as reported by CNBC Awaaz. This major transaction involves the sale of 77 lakh shares at a base price of ₹4,266 per share, representing a 7% discount. The total deal is valued at approximately ₹3,293 crore.

Background and Financial Performance

This decision comes in the wake of a stellar financial performance by InterGlobe Aviation, the parent company of Indigo. For the fiscal year 2024, InterGlobe Aviation announced a record-breaking profit of ₹8,172 crore. In the fourth quarter alone, the company reported a net profit of ₹1,894 crore, marking its sixth consecutive quarter of profitability. This is a significant increase from the ₹919.2 crore net profit reported in the corresponding quarter of the previous fiscal year.

The company’s revenue from operations also saw a robust increase, climbing 26% to ₹17,825.3 crore, up from ₹14,160.6 crore in the same period of the previous fiscal year. At the operating level, Earnings Before Interest, Taxes, Depreciation, Amortization, and Rent (EBITDAR) jumped 48.7% to ₹4,412.3 crore in the fourth quarter, compared to ₹2,966.5 crore in the year-ago period. This resulted in an improved EBITDAR margin of 24.8%, up from 20.9% in the corresponding period of the previous fiscal year.

Cost Efficiency and Operational Improvements

On the cost efficiency front, Indigo achieved a notable reduction in its fuel cost per available seat kilometre (CASK), which decreased by 6.9% to ₹1.72. However, the CASK excluding fuel saw an increase of 14.7%, reaching ₹2.90. This reflects the company's ongoing efforts to optimize operational efficiency and manage costs effectively in a competitive market.

Regulatory Constraints and Share Sale Details

According to sources, due to regulatory constraints, Rahul Bhatia is prohibited from selling additional shares in the market for a minimum period of one year. This restriction adds a layer of complexity to the transaction but also highlights the strategic planning involved in the timing and execution of this stake sale.

InterGlobe Enterprises’ decision to sell a 2% stake in Indigo at this juncture can be seen as a strategic move to capitalize on the airline's strong financial performance and the favorable market conditions. Despite the 7% discount on the share price, the sale is expected to generate significant capital for the holding company.

Market Reaction and Future Outlook

Following the announcement of the stake sale, shares of InterGlobe Aviation ended at ₹4,553 on the BSE, up by ₹181.65 or 4.16%. This positive market reaction underscores investor confidence in the company’s robust financial health and future growth prospects.

Looking ahead, the partnership between InterGlobe Enterprises and Indigo is expected to remain strong, with continued focus on expanding market share, improving operational efficiencies, and enhancing customer satisfaction. The proceeds from the stake sale will likely be reinvested to support these strategic objectives, further solidifying Indigo's position as a leading low-cost carrier in the global aviation industry.

Strategic Implications of the Stake Sale

The sale of a 2% stake in Indigo by InterGlobe Enterprises also highlights the broader strategic implications for both the holding company and the airline. By monetizing a portion of its stake, InterGlobe Enterprises can unlock significant value, which can be utilized to support other business ventures or reinvest in Indigo's growth initiatives.

For Indigo, this transaction serves as a testament to its strong market position and financial stability. The airline's ability to deliver consistent profitability and revenue growth, even in a challenging economic environment, underscores its resilient business model and strategic foresight.

Conclusion

In conclusion, the planned sale of a 2% stake in Indigo by InterGlobe Enterprises represents a strategic move to capitalize on the airline’s record-breaking financial performance and favorable market conditions. With a total deal value of ₹3,293 crore, this transaction not only underscores the strong financial health of Indigo but also highlights the strategic vision of InterGlobe Enterprises in navigating the complexities of the aviation industry. As both entities continue to focus on growth and operational excellence, this stake sale marks a significant milestone in their ongoing journey towards sustained success and market leadership.

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