As it prepares to attract fresh foreign direct investment (FDI), the country’s largest airline by passengers, IndiGo, has applied to the Foreign Investment Promotion Board (FIPB) for an approval to restructure its promoter shareholding.
In the application reviewed by FE, InterGlobe Aviation (operates under the IndiGo brand) has sought conversion of a part of the 47.88% stake held by US-based Rakesh Gangwal, his wife Shobha Gangwal and the Chinkerpoo Family Trust from the FDI category to Non-Resident Indian (NRI). This 47.88% stake is held through US-based Caelum Investments, in which the Gangwals together have 60%.
While only 49% composite foreign ownership cap (FDI plus FII) is currently permitted in domestic passenger airlines, NRIs are allowed to hold 100%. Thus, the restructuring will free up room for InterGlobe to attract fresh FDI investments. The application will be taken up by the FIPB in its meeting scheduled for Friday, August 1.
The move will “consequently free up the available limit for FDI in the Applicant (InterGlobe). Availability of such FDI limit is in the interest of the Applicant as it would open up possibilities for sources of capital and induction of foreign investments in the form of FDI,” the company said in its application.
Under the scheme, InterGlobe has proposed to merge Caelum with the company, cancel and extinguish Caelum's 147,000 shares (face value of Rs 1,000 each), then issue a similar number of shares to the members of Caelum directly, “majority of whom are NRIs”.
Besides Caelum's 47.88% stake in InterGlobe, 51.21% stake is currently held by IndiGo’s other promoter Rahul Bhatia’s InterGlobe Enterprises. Meanwhile, the Gangwal and Bhatia family members also hold smaller stakes in their individual capacities — Shobha Gangwal has 0.473%, Asha Mukherjee 0.488%, Rohini Bhatia 0.003%, Kapil Bhatia 0.016% and Rahul Bhatia 0.013%
Incidentally, IndiGo is also believed to be eyeing its IPO next year, where it could raise about $400 million, as per CAPA estimates. IndiGo is the only domestic airline to consistently report profits, in market where cumulative airline losses have climbed to R50,000 crore. In FY13, the carrier had announced a R787-crore profit. With 79 Airbus A320s in operation and over 180 more in order, IndiGo currently has a domestic market share of 31.6% (June 2014).