Dear Indigo, What are you up to ?

Indigo, you are now the saving grace of Indian Aviation.

Equity market now has a new lucrative scrip in InterGlobe Aviation, the promoter of low-cost carrier IndiGo Airlines, whose shares have shot up 31 per cent since its listing on the bourses on November 10 and which is now trying to find a base. The InterGlobe IPO, which closed recently, received bids for over 6.14 times the shares on sale led by aggressive demand from foreign institutions. This was the only aviation IPO in India in the last decade. The total consideration was for INR 3,000 crores approximately. 

Will this optimism be a damp squib ?

Many analysts, who had a cautious view on InterGlobe when the IPO hit the market in October last week, have still refused to come to terms with the good show the issue has done in the market. They maintain that it is going to be a short-lived sensation. 

  • The stock got listed on the bourses on November 10 at Rs 865, a 12 per cent premium to the issue price of Rs 765.
  • It has surged 31 per cent since then.
  • Interglobe Aviation has touched a 52-week high of Rs 1,039.50 on 13th Nov. 
  • The stock last traded on Nov 16, at Rs 987.60. 
  • 55% of users recommend buying Interglobe.
The stock is bought today at Rs 990. Will it reach Rs 1990 or Rs 550 level in a year ? Remains to be seen.

Despite the strong performance of the stock post listing, many analysts remain cagey on the stock, mainly because of their discomfort with the very business model of low-cost carriers (LCC). The stronger it performs, the more artificial it appears. Globally, investment guru Warren Buffett has long dumped LCCs and gave a thumbs down to the business, turning investors bearish on this business the world over. 

Recently, Khaitan & Co has advised selling shareholders Rakesh Gangwal, Shobha Gangwal, Dr Asha Mukherjee and The Chinkerpoo Family Trust on the initial public offering of InterGlobe Aviation Ltd. InterGlobe runs the no-frills carrier IndiGo.

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