IndiGo shares slump 6% amidst promoter's $1 billion stake sale plan

Shares of InterGlobe Aviation Ltd, IndiGo's parent, experienced a significant drop of 5.62 per cent to hit a low of Rs 5,175 in Friday's trade. This decline followed reports suggesting that InterGlobe intends to sell approximately 4 per cent of its stake through block deals, aiming to raise about $1 billion.

The potential seller, according to sources cited by CNBC-TV18, is likely to be Rahul Bhatia, co-promoter and Managing Director of InterGlobe. The sale is part of an ongoing exit strategy by the promoters, paralleling the actions of co-promoter Rakesh Gangwal, who has progressively reduced his stake, now holding only 7.8 per cent in the airline.

This phased withdrawal began in 2022, with Gangwal selling shares amounting to Rs 40,000 crore. The recent move marks another step towards reducing the promoters' influence in the airline they co-founded in 2006. InterGlobe currently holds a 35.70 per cent stake in IndiGo.

MOFSL noted that IndiGo has adopted a completely different operational strategy after Pieter Elbers joined the company as the new CEO in September 2022.

"He has over 30 years of experience working at different positions at KLM Royal Dutch Airlines. His wealth of experience has not only helped IndiGo compete with global majors but also consistently increase its market share in the domestic market. However, this could also pose a 'key man' risk," the brokerage stated. MOFSL retained its 'Buy' on the stock with a target of Rs 6,375.

Nuvama Institutional Equities, however, believes the near-term outlook is challenging for IndiGo, as growth in capacity outpaces demand, hurting yields.

"Current valuations are unsupportive, but positive factors make the risk-reward balanced. We are trimming FY26E Ebitdar (Earnings before interest, taxes, depreciation, amortization and restructuring or rent costs) by 3 per cent as we factor in Q1 FY26 guidance and the adverse impact on yields and demand due to geopolitical tensions. We are rolling over to FY27E, yielding a 9 per cent rise in target to Rs 5,199; retain 'HOLD," it said.