IndiGo’s big IPO fails to lure many retail investors

InterGlobe Aviation, the promoter of IndiGo airline, has failed to attract enough retail investors to its Rs 3,000-crore initial public offer (IPO), the biggest public offer since December 2012.

According to market experts, small investors largely stayed away from the IPO citing expensive valuation. Only 82 per cent of the portion reserved for the retail category was subscribed on the third and last day of sale. On the other hand, institutional investors participated in large numbers taking a long-term positive view on the domestic aviation sector. The portion reserved for qualified institutional bidders (QIB) was subscribed 17.80 times while the portion set aside for high net-worth investors was subscribed 3.57 times.

Overall, the IPO was subscribed 6.1 times receiving bids for 18.33 crore shares as against the issue size of Rs 3.01 crore shares.

InterGlobe Aviation is the only Indian airline, which has been making consistent profit since 2009. The company had fixed a price band of Rs 700-Rs 765 per share for its public offer valuing the company at around Rs 27,000 crore at the upper end of the price band.

“It is true that the company has been making consistent profits for the last few years when other domestic airlines were incurring losses. Jet Airways is valued at Rs 4,500 crore. Since, Indigo is a profit making company, it should definitely command a higher valuation than its peers. However, the valuation they are seeking (over Rs 27,000 crore) is too steep and they didn’t leave anything on table for small investors. If the valuations was around Rs 15,000 crore, I would have advised my clients to invest in this IPO,” said Ambareesh Baliga, a senior research analyst.

IndiGo is India’s largest passenger airline with a 33.9 per cent and 37.4 per cent market share of domestic passenger volume for fiscal 2015 and the five months ended August 31, 2015, respectively, according to the DGCA report.