IndiGo Block Deal: Stock Slips 3% After 83.7 Lakh Shares Change Hands

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IndiGo Block Deal: Stock Slips 3% After 83.7 Lakh Shares Change Hands

Shares of Interglobe Aviation Ltd., the parent company of IndiGo, saw a decline of up to 3% on Tuesday, June 11, following a significant block trade in the stock. This development has raised interest among market participants and investors.

June 11th, 2024 News

Key Details of the Block Deal

- Volume Traded: 83.7 lakh shares, representing around 2.2% of the company's total equity.

- Transaction Value: Over ₹3,689 crore.

- Average Price per Share: ₹4,406.

- Discount: The base price is at a 3% discount from the stock's closing level on Monday.

Uncertainty Over Buyers and Sellers

CNBC-TV18 reported that the buyers and sellers involved in this transaction could not be immediately ascertained. However, based on a term sheet accessed by CNBC Awaaz, it was reported that InterGlobe Enterprises, the holding company of the Rahul Bhatia family, was expected to sell a 2% stake in IndiGo through block deals.

Details from the Termsheet

- Shares Sold: 77 lakh shares.

- Base Price: ₹4,266 per share, suggesting a 7% discount.

- Total Deal Value: ₹3,293 crore.

- Lock-Up Period: 365 days on the seller.

Background on Stake Sales

InterGlobe Enterprises Pvt. Ltd currently holds a 37.75% stake in Interglobe Aviation, as per exchange filings. Notably, co-founder Rakesh Gangwal has been gradually reducing his stake since stepping down from the board in 2022. In March 2024, Gangwal sold a 5.8% stake, reducing his holding to approximately 5.8% by the end of the March 2024 quarter.

Stock Performance and Analyst Views

Despite the recent dip, IndiGo's shares have gained over 50% year-to-date, reflecting a strong performance so far this year. Global brokerage firm Morgan Stanley recently raised its target price on IndiGo shares to ₹5,142, maintaining an 'Overweight' stance. Morgan Stanley's optimism is based on the company's plans to evolve with loyalty programs, business class, and long-haul international services.

However, the brokerage also cautioned that near-term cost pressures might arise due to these changes, although it believes IndiGo has the right strategy to adapt to the evolving consumer landscape.

Meanwhile, Kotak Institutional Equities has a 'Buy' recommendation on IndiGo, with a target price of ₹5,700 per share. Kotak's analysis suggests that most competitors will face significant losses in FY2025, and the aggregate supply will not see a substantial boost over this period. Kotak expects IndiGo to show improved profitability more visibly from the financial year 2026 onwards.

Conclusion

The recent block deal involving a substantial volume of IndiGo shares has impacted the stock's short-term performance, yet analysts remain optimistic about the company's long-term prospects. With strategic initiatives underway and a positive outlook from major brokerage firms, IndiGo continues to be a stock to watch in the aviation sector.

Stay tuned for more updates and detailed analysis on this developing story and other market news.