Rakesh Gangwal, co-founder and co-promoter, of India’s biggest airline, Interglobe Aviation Ltd owned IndiGo, will sell up to 2.8% stake in the airline through a block deal, which will fetch him at least $250 million, as per deal terms seen by Mint.
The selling shareholders include Rakesh Gangwal, Shobha Gangwal and The Chinkerpoo Family Trust, collectively the Rakesh Gangwal promoter group, which owned a 36.6% stake in the airline as of 30 June.
Shares are offered to institutional buyers at a floor price of Rs1,850 apiece, a discount of 6.5% to the closing price of Rs1,977 per share on the NSE on Wednesday.
At the floor price, the stake sale will fetch Gangwal promoter group at least Rs1,996 crore or $250 million.
Investment banks Morgan Stanley India Co. Pvt. Ltd, Goldman Sachs (India) Securities Pvt. Ltd and J.P. Morgan India Pvt. Ltd are the brokers to the block trade. The block trade will be executed on 8 September.
InterGlobe Aviation Ltd, which operates IndiGo airline, was founded by businessman Rahul Bhatia and airline veteran Rakesh Gangwal in 2006.
A dispute between the two founders became public in July 2019 when Gangwal complained to market regulator SEBI regarding issues related to corporate governance and related-party transactions at IndiGo. The two promoters had also approached the London Court of Arbitration for resolution of the dispute where the final award came on Sep 23. The court had given a period of 90 days to enforce the order. Although the details of the award have not been made public, it is believed to have favoured Gangwal.
The feud finally came to an end when the two promoters convened an extraordinary general meeting in December 2021 to remove restrictions on transfer of promoter shares and amend articles of association. The resolution was passed and thereby cleared the path for the promoters to dilute their stake. Within two months, Gangwal announced his resignation from IndiGo board on Feb 18, 2022 with immediate effect. He had further announced that he will “slowly” reduce his equity stake in the airline over a period of more than five years in order to diversify his holdings.
“While new investors should benefit from the potential future growth in the company’s share price, a gradual reduction of my stake should also allow me to benefit from some of the upside. Like any plan, future events may impact my current thinking,” Gangwal had said on Feb 18, adding that he shall consider participating as a board member again in the future.
As per July data from Directorate General of Civil Aviation, IndiGo is the largest airline in India with a market share of 58.8%.The airline has recently posted a second straight quarter of net loss at Rs 1,064 crore despite its strongest revenue performance in a quarter at Rs 13,019 crore. With a fleet of over 275 aircraft, IndiGo currently operates around 1600 daily flights to 74 domestic and 26 international destinations.
As of June 2022, Bhatia’s InterGlobe Enterprises hold 37.83% stake in the airline, while Rakesh Gangwal Group, which comprises Rakesh Gangwal, Shobha Gangwal, and Chinkerpoo Family Trust, held 36.6%. Gangwal group’s stake is worth ₹27,972.68 crore based on IndiGo’s closing stock price on Wednesday.
