IndiGo block deal: InterGlobe Aviation stock in focus as promoters may sell stake today

Shares of InterGlobe Aviation Ltd are in focus on Thursday morning amid reports suggesting promoters Rakesh Gangwal and Chinkerpoo Family Trust are looking to sell up to 1.47 crore shares of the low-cost airline via block deals today. Citing terms of the deal, the reports suggested that the deal could be $850 million or Rs 6,750 crore in size. The block deal may take place at a discounted indicative price of Rs 4,593 per share, reports suggested..

IndiGo's free float is expected to increase to the maximum foreign float limit of 49 per cent, said Nuvama Alternative & Quantitative Research. This float increase is anticipated to generate an MSCI-related passive inflows of $35 million, translating to 0.6 million shares, with a 0.4-day impact. Additionally, the FTSE weight adjustment is expected to be minor, around USD 15 million, which equates to 0.3 million shares, with a 0.2-day impact, according to Nuvama Alternative.

"I don’t anticipate a significant price impact from passive flows, as the days' impact is low. Overall, the fundamental and quantitative momentum for IndiGo remains very strong, and the stock should continue to perform well," said Abhilash Pagaria, Nuvama Alternative & Quantitative Research.

Rakesh Gangwal had in February 2022 resigned from InterGlobe Aviation's board of directors and suggested that he would cut his stake in the airline over the next five years. Exchange data showed he cut his stake in the airline in March this year, offloading 5.8 per cent stake for Rs 6,786 crore. His wife Sobha Gangwal had in August 2023 sold 3 per cent stake in the company for about Rs 2,800 crore. As of June 30, Gangwal himself held 2,27,46,493 shares or 5.89 per cent stake in InterGlobe Aviation. 

The Chinkerpoo Family Trust (Trustee: Shobha Gangwal & J.P. Morgan Trust Company of Delaware) held 5,20,50,413 shares or 13.49 per cent stake in InterGlobe Aviation.

Data showed IndiGo’s domestic market share stood at 62 per cent in July, down 192 bps, led by subdued  growth in capacity against peers. The aircraft-grounding situation (70-plus) stayed an impediment to capacity addition, analysts said.IndiGo in its Q1FY25 conference call had guided for higher single-digit growth in capacity in Q2 versus actual growth of mere 4 per cent YoY in July. 

SpiceJet’s market share was down 105 bps YoY to 3.1 per cent, owing  to aircraft groundings and financial distress; only 23 out of 56 aircraft are  operational. "Air India Group’s market share was up 324 bps in Jul-24 led by an  impressive uptick in capacities of Air India (29 per cent YoY) and Vistara (21 per cent YoY)," Nuvama said.

Analysts are largely positive on IndiGo shares. A likely duopolistic industry structure dominated by IndiGo and Air India bodes well, they said adding that it may spur pricing discipline, thereby driving yields up over long term.