IndiGo eyes up to $510m in major IPO

The operator of top Indian airline IndiGo is looking to raise up to $510 million in its initial public offering (IPO), according to sources, betting on an improved financial outlook helped by lower oil prices and surging passenger growth.

That figure is higher than previously expected; bankers said in the summer that the company was expected to raise up to $400 million, but its valuations have since been bolstered after it reported a big rise in annual profits.

InterGlobe Aviation Ltd., which operates the low-cost airline, has set the indicative price band for the IPO at between Rs.700 and Rs.765 per share, according to the three sources directly involved in the process.

At the top end of the price band, the airline would raise as much as $510 million, making it the largest IPO in the Indian market since 2012, and giving the company a market value of about $4.2 billion, said the sources.

The sources did not want to be named ahead of a public announcement. A spokeswoman for IndiGo did not respond to a request for comment.

IndiGo, whose rivals in the Indian aviation market include Jet Airways and SpiceJet, has been the only consistently profitable airline in the country for the last seven years, according to consultancy Centre for Aviation.

Its share sale, set to be the first airline listing in nine years, will open on Oct. 27. The company plans to use the proceeds to pay off some outstanding aircraft leasing liabilities and to expand its business.

Some investors, however, said the pricing was on the high side. “Even though IndiGo is doing well and it is the country’s most profitable airline, the pricing for this issue is a bit aggressive,” said Neeraj Dewan, director at brokerage Quantum Securities.

The IPO is set to be the biggest airline public issue in India since low-cost carrier Deccan Aviation’s market debut in 2006. It will also be the second high-profile public offering this month, triggering hopes of a revival in India’s sluggish capital market activity.

Coffee Day Enterprises Ltd., India’s biggest coffee chain operator, was oversubscribed for its up to $177 million IPO which closed on Friday.

IndiGo’s book for cornerstone investors — guaranteed a major share of the offering regardless of the final price — will open on Oct. 26. The IPO will close on Oct. 29 for all investors, according to the company’s prospectus.

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