In November, InterGlobe Aviation which operates the low-cost carrier IndiGo, made a remarkable debut on the bourses. It got listed at Rs 856 on the BSE, higher than the issue price of Rs 765 per share. The stock touched its 52-week high of Rs 1,395.50 on BSE on January 1, 2016 but since then it has fallen by over 45 per cent.
The now-listed low cost airline is promoted by Rahul Bhatia and Rakesh Gangwal and is just 10 years old. It is currently India's largest airline by market share in terms of passengers carried, which stood at 37.2 per cent in December 2015 leaving the National carrier Air India way behind. Air India's similar market share is 16.4%.
InterGlobe Aviation raised Rs 3,008.5 crore at issue price of Rs 765 per share from the blockbuster IPO, which was the biggest initial share sale in three years. In December aviation stocks in general and InterGlobe in particular were riding the re-rating wave.
Read also: Stars are Shining Bright and Spicejet Shares
However, since its December quarter results declared on January 21, the stock has been seeing a downward trend.
Shares of InterGlobe Aviation had ended at Rs 722.25 (BSE) & 719.7 (NSE) on 11 Feb 2016, slipping 5-6% below its issue price of Rs 765. It also has touched earlier Rs 702 (on BSE) and Rs 698 (on NSE) as its 52-week lows. Currently, the stock is trading at Rs 777 level.
Leading bourse BSE revised the circuit limit for the share movement of InterGlobe Aviation as part of surveillance action. The new limits have been set. The price of InterGlobe Aviation cannot change by more than 10 per cent in a day during a trading session.
The delay in delivery of the more fuel-efficient planes, the new Airbus A320 neos aircraft by European aircraft maker Airbus had an adverse impact on the ambitious growth plans of IndiGo. It has been pinning all its hopes on these more fuel-efficient planes The delivery was due to begin from December 2015.
Uncertainty persists over the scheduled delivery of A320 neos aircraft which is key for Indigo's strategies. Concerns over the targeted fleet size by March 2016 due to the delay in supply of A320 neos by Airbus has hurt investor sentiment. The company's ambitious fleet expansion plans have taken a beating with Airbus recently indicating a potential delay in the delivery schedule for A320 Neos due to some "industrial reasons".
Read also : Airbus Couldn't Control Cost of Production; Increases its Planes' Prices
Due to Airbus, IndiGo's plans and meeting the stated target of 111-aircraft fleet by this fiscal end and 132 by 2017 went awry.
Read also : Indigo Joins 100 Aircraft Club
Indigo's contemporary, the Wadia group airline, GoAir, also plans to come out with its IPO next fiscal. Currently, GoAir has 19 A320s in the fleet operating 144 daily flights across 22 domestic destinations. The IPO would help GoAir raise funds for international operations, which it would start after having a fleet of 20 planes. As per regulations, the 5/20 rule, a domestic carrier can fly overseas only if it has 5 years of operational experience and a minimum of 20 aircraft.
Like Indigo, GoAir is also in the middle of persisting vagueness over the scheduled delivery of new Airbus aircraft which is key for its motivated growth strategy. The airline initially was looking to hit the capital market in the current financial year like Indigo did. Sources said that GoAir is still awaiting clarity on the delivery of 72 Airbus A320 neo planes before taking a final decision on the timing of the IPO. The delivery of the aircraft was to start from April this year. While GoAir has not officially made its IPO plan public, sources said that GoAir would be looking to raise around USD 150-175 million (Rs 10,000 to 12,000 million). Apart from aircraft delivery schedule, GoAir would also be taking into account market conditions before deciding on the IPO timing, sources said. But GoAir's fleet expansion plans have been severely upset due to Airbus citing "industrial reasons". The airline was supposed to have 26 Airbus A320 neos by end of 2017. In June 2011, it had placed order for 72 new A320 neos, valued at about Rs 3,24,000 million on list price, with Airbus.
Analysts Views on the InterGlobe Aviation correction:
Ashu Madan of Religare Securities told CNBC-TV18:
- As far as fundamentals are concerned, as long as the crude prices remain low, probably these airline stocks will do well. So, because of whatever reason InterGlobe Aviation has come down, probably somebody who has not bought, I would say maybe after six months or one year will realize that this was an opportunity."
- My suggestion would be at Rs 800 around level must buy and in the medium-term one will definitely should get an exit. So, one should use this opportunity and because of whatever has happened, it has been a good correction but over the longer term or medium to long-term aviation stocks still looks to be doing well.
SP Tulsian of sptulsian.com stated on CNBC-TV18:
- Let me be very blunt in saying that 95 percent of the experts were bullish on Interglobe Aviation which is generally happening with IPOs and let me tell you IPO is a big trap. The valuations are looking good because SpiceJet and Jet Airways has not corrected in that proportion. So, looking to the relative wise basis probably now, IndiGo looks good at the current scenario.
Rajat Rajgarhia, Managing Director-Institutional Equities, Motilal Oswal Securities:
- The InterGlobe Aviation management could have handled communications of its earnings better. we have been quite positive on this company. In fact, this whole space over the last six months has been looking quite interesting. IndiGo being the market leader, always looked a lot more promising. The core thesis of a 20 percent volume growth in this country sustaining for sometime low oil prices and almost, a 35-37 percent kind of a big market share player should do good to this company. I guess, you are going to see the stock stabilising after the kind of correction that we have seen. Investors would like to wait for one or two quarters. Also, this entire news flows about the delivery of the aircraft, etc, once it subsides, the focus will start shifting back on the earnings.
The now-listed low cost airline is promoted by Rahul Bhatia and Rakesh Gangwal and is just 10 years old. It is currently India's largest airline by market share in terms of passengers carried, which stood at 37.2 per cent in December 2015 leaving the National carrier Air India way behind. Air India's similar market share is 16.4%.
InterGlobe Aviation raised Rs 3,008.5 crore at issue price of Rs 765 per share from the blockbuster IPO, which was the biggest initial share sale in three years. In December aviation stocks in general and InterGlobe in particular were riding the re-rating wave.
Read also: Stars are Shining Bright and Spicejet Shares
However, since its December quarter results declared on January 21, the stock has been seeing a downward trend.
Shares of InterGlobe Aviation had ended at Rs 722.25 (BSE) & 719.7 (NSE) on 11 Feb 2016, slipping 5-6% below its issue price of Rs 765. It also has touched earlier Rs 702 (on BSE) and Rs 698 (on NSE) as its 52-week lows. Currently, the stock is trading at Rs 777 level.
Leading bourse BSE revised the circuit limit for the share movement of InterGlobe Aviation as part of surveillance action. The new limits have been set. The price of InterGlobe Aviation cannot change by more than 10 per cent in a day during a trading session.
The delay in delivery of the more fuel-efficient planes, the new Airbus A320 neos aircraft by European aircraft maker Airbus had an adverse impact on the ambitious growth plans of IndiGo. It has been pinning all its hopes on these more fuel-efficient planes The delivery was due to begin from December 2015.
Uncertainty persists over the scheduled delivery of A320 neos aircraft which is key for Indigo's strategies. Concerns over the targeted fleet size by March 2016 due to the delay in supply of A320 neos by Airbus has hurt investor sentiment. The company's ambitious fleet expansion plans have taken a beating with Airbus recently indicating a potential delay in the delivery schedule for A320 Neos due to some "industrial reasons".
Read also : Airbus Couldn't Control Cost of Production; Increases its Planes' Prices
Due to Airbus, IndiGo's plans and meeting the stated target of 111-aircraft fleet by this fiscal end and 132 by 2017 went awry.
Read also : Indigo Joins 100 Aircraft Club
Indigo's contemporary, the Wadia group airline, GoAir, also plans to come out with its IPO next fiscal. Currently, GoAir has 19 A320s in the fleet operating 144 daily flights across 22 domestic destinations. The IPO would help GoAir raise funds for international operations, which it would start after having a fleet of 20 planes. As per regulations, the 5/20 rule, a domestic carrier can fly overseas only if it has 5 years of operational experience and a minimum of 20 aircraft.
Like Indigo, GoAir is also in the middle of persisting vagueness over the scheduled delivery of new Airbus aircraft which is key for its motivated growth strategy. The airline initially was looking to hit the capital market in the current financial year like Indigo did. Sources said that GoAir is still awaiting clarity on the delivery of 72 Airbus A320 neo planes before taking a final decision on the timing of the IPO. The delivery of the aircraft was to start from April this year. While GoAir has not officially made its IPO plan public, sources said that GoAir would be looking to raise around USD 150-175 million (Rs 10,000 to 12,000 million). Apart from aircraft delivery schedule, GoAir would also be taking into account market conditions before deciding on the IPO timing, sources said. But GoAir's fleet expansion plans have been severely upset due to Airbus citing "industrial reasons". The airline was supposed to have 26 Airbus A320 neos by end of 2017. In June 2011, it had placed order for 72 new A320 neos, valued at about Rs 3,24,000 million on list price, with Airbus.
Analysts Views on the InterGlobe Aviation correction:
Ashu Madan of Religare Securities told CNBC-TV18:
- As far as fundamentals are concerned, as long as the crude prices remain low, probably these airline stocks will do well. So, because of whatever reason InterGlobe Aviation has come down, probably somebody who has not bought, I would say maybe after six months or one year will realize that this was an opportunity."
- My suggestion would be at Rs 800 around level must buy and in the medium-term one will definitely should get an exit. So, one should use this opportunity and because of whatever has happened, it has been a good correction but over the longer term or medium to long-term aviation stocks still looks to be doing well.
SP Tulsian of sptulsian.com stated on CNBC-TV18:
- Let me be very blunt in saying that 95 percent of the experts were bullish on Interglobe Aviation which is generally happening with IPOs and let me tell you IPO is a big trap. The valuations are looking good because SpiceJet and Jet Airways has not corrected in that proportion. So, looking to the relative wise basis probably now, IndiGo looks good at the current scenario.
Rajat Rajgarhia, Managing Director-Institutional Equities, Motilal Oswal Securities:
- The InterGlobe Aviation management could have handled communications of its earnings better. we have been quite positive on this company. In fact, this whole space over the last six months has been looking quite interesting. IndiGo being the market leader, always looked a lot more promising. The core thesis of a 20 percent volume growth in this country sustaining for sometime low oil prices and almost, a 35-37 percent kind of a big market share player should do good to this company. I guess, you are going to see the stock stabilising after the kind of correction that we have seen. Investors would like to wait for one or two quarters. Also, this entire news flows about the delivery of the aircraft, etc, once it subsides, the focus will start shifting back on the earnings.