IndiGo Co-Founder Rakesh Gangwal to Sell 3.8% Stake for Rs 7,100 Crore
Rakesh Gangwal, co-founder of India’s largest airline IndiGo, is poised to reduce his stake in the company further, with plans to divest approximately 3.8% of his holdings in InterGlobe Aviation, the parent company of IndiGo. This strategic move is valued at around Rs 7,100 crore ($8.5 billion) and is part of Gangwal’s long-term plan to gradually lessen his involvement in the airline sector.
Sources indicate that the floor price for this transaction has been set at Rs 4,593 per share, which is approximately 6% below IndiGo’s last closing price of Rs 4,859.2. The divestment will see Gangwal and his associated entities reduce their stake from the current 19.38% in IndiGo. This latest transaction follows a recent block deal on August 29, where approximately 6% of the stake in InterGlobe Aviation was sold, amounting to a significant Rs 11,000 crore deal.
Shares of IndiGo saw a slight dip following the announcement, trading at Rs 4,838 on the NSE at 9:22 am, marking a decline of about 0.45% from the previous close. While exact details about the parties involved in this transaction have not been confirmed, CNBC-TV18 reported on August 28 that Gangwal was seeking to further reduce his stake by divesting equity worth Rs 10,300 crore. This figure represents approximately 5.8% of the company at the discounted share price, closely aligning with Gangwal’s remaining stake.
The sale will also trigger a 150-day lock-in period before Gangwal can execute another tranche of the sale, according to CNBC-TV18. This restriction is part of the broader strategy Gangwal outlined to gradually reduce his holding in IndiGo over a five-year period. Gangwal’s departure from InterGlobe Aviation’s board of directors in February 2022 marked the beginning of this planned divestment.
As of the end of June 2024, the Gangwal-backed promoter group held a 19.38% stake in InterGlobe Aviation, down significantly from 36.7% in 2019. This stake includes 13.49% held by the Chinkerpoo Family Trust, managed by Shobha Gangwal and the JP Morgan Trust Company of Delaware, alongside Rakesh Gangwal’s 5.89% personal stake.
This is not the first instance of Gangwal’s stake reduction. The first major tranche occurred in September 2022, when the Gangwal family sold 2.8% of their shares in IndiGo for Rs 2,000 crore. This was followed by a second tranche in February 2023, with another 4% sold for Rs 2,900 crore. In August 2023, Shobha Gangwal, Rakesh Gangwal’s wife, sold her nearly 3% stake for Rs 2,801.8 crore.
The gradual divestment by Gangwal is part of a planned exit strategy that aligns with his vision to reduce his role in the airline industry while still maintaining a significant stake in the company until the full divestment is complete.
Additional Insights:
Rakesh Gangwal’s divestment strategy reflects a broader trend among high-profile investors who seek to liquidate substantial holdings in large companies while navigating market conditions and regulatory requirements. The decision to set a floor price below the recent closing price may also indicate a strategic move to facilitate a smooth transaction while addressing potential market reactions.
The ongoing reduction of Gangwal’s stake is expected to impact IndiGo’s stock performance and could influence market sentiment regarding the airline’s future prospects. The substantial value of these transactions highlights the high stakes involved in such large-scale equity divestments.
