IndiGo shares fall over 4% after 11 mn shares change hands via block deal

IndiGo block deal: Reports suggest Rahul Bhatia-led InterGlobe Enterprises was the likely seller of its 2 per cent stake

IndiGo block deal: Shares of InterGlobe Aviation, the parent company of IndiGo airlines, fell 4.4 per cent to Rs 4,361 apiece on the BSE on Tuesday after nearly 11 million shares changed hands on the counter. 

At 10:20 AM, InterGlobe Aviation share price was down 3.46 per cent at Rs 4,404.75 on the BSE as against a 0.26-per cent rise in the benchmark BSE Sensex. At 9:15 AM, around 7.8 million shares had changed hands on the BSE at Rs 4,417.5 per share.

This rose to 10.8 million shares, together on the NSE and BSE, till the time of writing of this report. The buyers and sellers could not be ascertained immediately.

That said, reports suggest Rahul Bhatia-led Interglobe Enterprises was looking to sell 2 per cent stake, or 7.7 million shares, in the low-cost carrier at a likely floor price of Rs 4,361 per share.

At the end of the March quarter, Interglobe Enterprises held 37.15 per cent stake in IndiGo. Rahul Bhatia, in his personal capacity, held 0.01 per cent stake.

This is the first time the Bhatia Family is selling their stake in InterGlobe Aviation post the IPO. InterGlobe Enterprises' stake sale also comes after a series of stake sales by the other promoter Rakesh Gangwal. Gangwal held 5.89 per cent stake in InterGlobe Aviation at the end of Q4FY24.

Following the block deal, there is likely be a lock-up period of 365 days for the seller.

Financially, IndiGo operator Interglobe Aviation reported a consolidated net profit of Rs 1,894.82 crore for the quarter ending on March 31 (Q4) in the financial year 2023-24 (FY24). 

Net profit of the low-cost airline zoomed 106 per cent compared to Rs 919.20 crore reported in the year-ago period. Sequentially, however, profit dropped 36.8 per cent from Rs 2,998.12 crore. 

Besides, the company reported a 25.9 per cent year-on-year (Y-o-Y) growth in revenue from operations at Rs 17,825.27 crore, from Rs 14,160.6 crore. Sequentially, revenue dropped 8.4 per cent from Rs 19,452.148 in Q3.

Analysts at Elara Capital, however, have reiterated their 'Sell' rating on the stock given the anticipated pause in market share growth and potential margin decline in H2FY25.

According to the brokerage's recent report, nearly 80 IndiGo aircraft have been grounded out of a total 136 Pratt & Whitney (P&W) engine-fitted fleet vs 40 in Q3FY24

and 75 in Q4FY24, as P&W continues with its engine inspection exercise. The grounded planes have hit around 13 per cent of domestic aviation capacity. 

"Besides, IndiGo lost domestic market share from the peak of 63.4 per cent in September 2023 to 60.6 pe cent in April 2024. This mirrors 46 narrow-body aircraft delivery to competitors, which includes 37 by Air India, five by Vistara, and four by Akasa Air vs 20 by IndiGo. Moreover, IndiGo's fleet addition was nullified by the grounding of ~75 aircraft, due to engine inspection exercise at P&W," it said in its report.

Anticipating a further decline in the airline's yields, due to falling air fares, Elara Capital has assigned a target price of Rs 3,566 to the stock based on 9.0x FY26E EV/EBITDA.