Mumbai, March 27: IndiGo, India's biggest airline by market share, will offer shares to the public to raise Rs 2,500 crore and is preparing to file a draft prospectus by May.
The profit-making airline, which has been mulling the float since last year, has kickstarted the process by appointing investment bankers. The timing of the initial public offering, however, has not been set and will depend on market conditions.
IndiGo has picked Citigroup, Kotak Investment Banking, Morgan Stanley, JP Morgan Chase, UBS and Barclays as the lead managers for the listing.
Analysts said the shares could get a good response from investors.
Cut-throat fare wars and high costs have hurt many an airlines' bottomline in the past, but IndiGo has managed to successfully post profits.
Founded in 2006 by travel entrepreneur Rahul Bhatia and ex-US Airways chief executive Rakesh Gangwal, the airline has increased its share in India's overall domestic air travel market to a third.
One of the key factors behind the consistent profitability has been its on-time performance.
Its success story could make it an attractive investment, company watchers say.
"Investors like good quality companies and IndiGo has proved its efficiency in a very difficult terrain. The IPO should, therefore, get a good response,'' an analyst said.
He added that there were other positive factors as well that could lead to a better response. Lower crude oil prices will work in favour of the airline.
"Crude prices have also fallen, so there would be good demand for its IPO," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.
However, Arun Kejriwal, director-founder of Kris, said that pricing of the issue would play a crucial role in determining the response.
"Everything is in the price. If the mood of the markets is good at that point of time and the pricing is right, people will lap it up,'' he said.
IndiGo, owned by hospitality and travel company InterGlobe Enterprises, has built a profitable base helped by its low-cost model using a single type of narrow-body planes.
By contrast, rivals such as SpiceJet and Air India are losing money - even as millions more Indians travel each year - because of high operating costs and tough competition that has kept fares among the lowest in the world.
Even IndiGo has not been immune to the cut-throat competition that has seen losses almost double for the industry as a whole.
IndiGo, which had the largest marketshare of 37.1 per cent in February when it carried 22.31 million passengers, had posted Rs 317 crore net profit last fiscal, which though was nearly half of Rs 787 crore it had reported the year before.
If IndiGo does go ahead with the offering, it will be the fourth airline to get listed on the bourses.
Some of its peers whose shares are now traded on the bourses include Jet Airways and low-cost carrier SpiceJet. Kingfisher Airlines was listed earlier, but trading in the counter was suspended in December last year.
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