InterGlobe Aviation on Tuesday made a dream debut on the stock market as its shares climbed more than 14% on the day of listing, bucking the trend in broader markets.
The stock closed at R878.45 on the BSE, up R113.45 or 14.83% from the initial public offering (IPO) price of R765 per share. The shares listed at Rs 856 on the BSE.
More than 3.24 crore of InterGlobe’s shares exchanged hands on the BSE and the NSE, and the first day jump pegs the company’s market valuation at Rs 31,655 crore.
InterGlobe’s first day performance is the fourth best among the companies listed on the bourses this calendar year. VRL Logistics rose 43% on the listing day, followed by Inox Winds (34.7%) and Syngene International (24.1%).
The company had raised R3,010 crore through the public issue last month by allotting shares at R765 per share. The issue was subscribed more than six times with support from qualified institutional buyers (QIBs) and high net worth individuals (HNIs) such as Rakesh Jhunjhunwala.
InterGlobe, the company that owns and operates low-cost airline Indigo Airlines, was the biggest IPO since Bharti Infratel’s issue in December 2012. This year, 18 companies have raised more than R11,000 crore from the primary markets – the highest in five years.
InterGlobe’s share sale is also the first by an Indian airline since the 2006 listing of Deccan Aviation, which was later taken over by Kingfisher Airlines. Jet Airways, then India’s largest private airline, raised R1,900 crore in February 2005.
India’s airlines lost a combined $10 billion in the past six years as fierce competition forces them to sell tickets below cost and provincial taxes on jet fuel drive up their expenses.
Founded by former US Airways chief executive officer Rakesh Gangwal and former travel agent Rahul Bhatia, IndiGo hopes to give the lie to legendary investor Warren Buffett, who famously swore off airline stocks after his $358 million “mistake” with US Airways Group before Gangwal’s time.
“I guess our founders disregarded that advice 10 years ago, and have gone from millionaires to billionaires today,” IndiGo president Aditya Ghosh said Tuesday about Buffett’s view on airlines. “The opportunities that India provides are vast. If you can create the right product, there will be demand.”
IndiGo is the only Indian airline to turn a profit in each of the past seven years, taking advantage of a burgeoning middle-class in the world’s second most populous nation. The carrier is taking advantage of low fuel prices to pursue an ambitious growth agenda. In August IndiGo firmed up an order to buy as many as 250 A320neo single-aisle jets for $26.6 billion. This came comes after IndiGo’s $15 billion order in January 2011 for 180 Airbus planes.
IndiGo had an enterprise value-to-sales ratio of 2.1, calculated using the offer price of R765 rupees and earnings in the year ended March 31, according to IIFL India Private Clients. Both Jet Airways and SpiceJet have a ratio of 0.7, the brokerage said in a note on October 26.