IndiGo makes a big bang market debut to become Asia’s third largest low-cost airline

Image: Reuters/Amit Dave
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InterGlobe Aviation, which owns India’s most successful budget carrier IndiGo, made its debut on the markets today (Nov. 10)—and its shares are flying.

The company has now touched a market capitalisation—the value of a company based on its stock price—of almost $5 billion (Rs31,936.6 crore), which, according to Bloomberg, makes IndiGo the third largest low-cost airline in Asia.

At 12:31 pm, the stock was trading at Rs886.2 a share on the BSE, 16% higher than the initial public offering (IPO) price of Rs765. The company’s shares had risen as much as 18% during early morning trading.

IndiGo launched its IPO on Oct. 27 and raised over Rs3,000 crore ($459 million). This was India’s biggest private sector IPO since 2012, when Bharti Infratel, a telecom tower infrastructure provider, raised Rs4,172.75 crore in its issue.

Profit maker

At a time when most large airlines in India are making heavy losses due to high cost and debt, IndiGo is one of the only two airlines to have made a profit in the 2015 fiscal. That’s one of the key reason why investors are so bullish about the low-cost carrier.

“InterGlobe is better placed than its peers to capture higher market share on the back of its proven management track record, continuous fleet addition and with its sustainable profitable business model,” brokerage firm Angel Broking said in a report. Benign oil prices are also likely to help.

But it’s not just retail investors who are attracted to IndiGo’s success. Qatar Airways, the second largest airline in the Middle East, is keen on acquiring 49% of IndiGo, its CEO Akbar Al Baker told Bloomberg earlier this month. “I couldn’t take a stake in IndiGo because the Indian authorities have restrictions on airlines taking part in an IPO of an airline,” Al Baker said. “If we can go up to the 49% that’s allowed, we’d like to go as much as that.”