Is believed to be in discussions with merchant bankers on the pricing and timing of the issue

After a gap of four years, InterGlobe Enterprises, the company that owns IndiGo, India’s biggest airline by market share, has revived plans to launch an initial public offering (IPO) following improvement in market conditions after the induction of a new government at the Centre.

InterGlobe is believed to be in discussions with merchant bankers on the pricing and timing of the issue, though the management has not made any announcement in this regard. IndiGo did not respond to a query.

The size of the issue is expected to be $400 million, the same amount of money the company was planning to raise through an IPO in the first-half of 2010. The low-cost airline was launched in the second-half of 2006 and since then has emerged as the fastest growing airline in India.

IndiGo, which has 31.6 per cent domestic market share, is the only profitable Indian carrier. For 2012-13, the airline reported a net profit of Rs.787 crore.

Delhi-based Rahul Bhatia’s InterGlobe Enterprises holds over 51 per cent stake in IndiGo while India-born U.S. citizen Rakesh Gangwal’s Caelum Investment LCC holds 48 per cent stake. Who will dilute how much stake in the IPO is not clear.

Internationally-known civil aviation veteran Mr.Gangwal was formerly the CEO and Chairman of U.S. Airways Group. It was only due to him that Airbus took an order of 100 aircraft from an unknown Indian entity in 2005. And since then IndiGo has not looked back.

According to Centre for Asia Pacific Aviation (CAPA) IndiGo’s IPO would attract significant interest.

“Despite the challenges experienced in the airline sector, there are bright spots such as IndiGo’s success in establishing itself as a sustainably profitable airline. Timing is approaching to leverage this achievement and an IPO is likely in the financial year 2014-15, possibly in the third quarter,” CAPA said in a report.

Largest-ever IPO

“If it proceeds, it is expected to be the largest-ever aviation IPO in India. CAPA estimates that IndiGo could raise $350-400 million from the flotation,” it added.

“The offer is likely to be preceded by strong sentiment about its future growth prospects with IndiGo expected to place another large order for 200-250 aircraft at Farnborough this month to meet its equipment requirement post-2015. The carrier has a fleet of 79 aircraft with an order book of 186,” CAPA added.

The proceeds of the IPO would fund its rapid expansion plans as the airline gears up to take on another low-cost carrier AirAsia that has already made its debut in India last month.

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