IndiGo is looking to raise $4billion by selling 10% stake via IPO

Indigo, is mulling to raise $400 million by selling 10% stake via Initial Public Offering (IPO). Its stock sale is almost eight times the market valuation of its largest listed rival.

IndiGo is preparing to file documents for an IPO in next two months, aiming to raise $400 million by selling a 10% stake, a person familiar with the matter told Economic Times. That would give the airline promoted by Rahul Bhatia's InterGlobe Enterprises and aviation industry veteran Rakesh Gangwal a valuation of Rs 25,200 crore.

This valuation is higher than what some industry officials expected. When compared, Jet Airways had a market capitalisation of Rs 3,242 crore at the close of trading on Tuesday and SpiceJet was valued at Rs 1,115 crore.

IndiGo's President Aditya Ghosh declined to comment on the company's IPO plans. Although there has been talk of an IndiGo IPO since middle of last year, the airline has been looking to get its timing "just right," the person told the financial daily, without elaborating.

The company will file a comprehensive IPO proposal known as a red herring prospectus with the Securities & Exchange Board of India (SEBI), the capital markets regulator. SEBI usually takes six to eight months to approve such documents, which means IndiGo's IPO may possibly be pushed to next year.

IndiGo's profit before tax in the financial year ended March 31 increased more than three-fold from Rs 477 crore in the previous year, the person told ET. The airline is yet to file its results with the Registrar of Companies. Its net profit in FY14 more than halved to Rs 317 crore owing to rising fuel costs and price wars. Consultant CAPA India pegged IndiGo's net profit for FY15 at $175 million (Rs 1,111.6 crore).

IndiGo has weathered the downturn in the aviation industry in the past few years better than its rivals and is expected to outperform them now that the sector is looking at an upswing.

Domestic air traffic grew 13.9% last year while international passenger numbers increased 9%. The CAPA report said Indian carriers' losses in this financial year are likely to narrow 40% to over $1.25 billion.

IndiGo currently has a fleet of 97 Airbus A320-200s and has placed an order for 180 more A320 NEOs (new engine options) with deliveries likely to start at the end of this calendar year. It signed a pact in October for a record 250 planes. The airline also has exercise rights or options for 100 more aircraft.

(Image: Indiatimes)