Introducing Shobha Gangwal: A Billionaire Who Recently Sold a ₹2,802 Crore Stake in a ₹95,000 Crore Airline

Indigo Airlines, operated by Interglobe Aviation, witnessed an almost 1% surge in its stock price on a recent Thursday following a substantial block deal. In this transaction, promoter Shobha Gangwal divested 3% of her ownership stake in the airline. Shobha, who is also the wife of Indigo's co-founder, Rakesh Gangwal, remains a significant investor and retains her position as the second-largest shareholder in the company, just after the promoter group Interglobe Enterprises. As of August 17, the airline boasts a market capitalization exceeding ₹95,000 crore and maintains a dominant position in the Indian aviation sector.

As of the moment, Indigo's stock is trading at ₹2,465 per share, marking a 0.30% increase on the BSE. The stock had earlier reached an intraday high of ₹2,481.95 per share on the same day.

Data sourced from the BSE reveals that Shobha Gangwal sold 1,15,23,361 equity shares of Indigo in a block deal executed on August 16, amounting to a total transaction value of ₹2,801.8 crore.

This transaction encompassed her entire shareholding, equivalent to 2.99% of the airline's equity, as of June 30, 2023.

After this block deal, Indigo's share price experienced a 3.6% decline, concluding at ₹2,457.60 per share on August 16.

Despite the divestment, Shobha Gangwal remains the second-largest shareholder in Indigo, holding the distinction of being the largest individual shareholder among NRI/foreign individuals. In conjunction with JP Morgan Trust Company of Delaware acting as a trustee, Shobha retains a 13.50% stake in the company, translating to 5,20,50,413 equity shares, valued at nearly ₹12,792 crores as of August 16, 2023. Collectively, as of June 30, 2023, her holdings amounted to 16.49%, which, before the August 16 block deal, had an estimated value of ₹16,200.82 crore in the airline.

Notably, Shobha Gangwal is a billionaire whose wealth is primarily concentrated in a single stock.

In contrast, her husband Rakesh Gangwal holds the second-largest individual share in Indigo, representing 13.23% of the airline's equity, equivalent to 5,10,21,132 equity shares. Rakesh co-founded Indigo in August 2006, alongside Rahul Bhatia.

As of June 30, 2023, the Bhatia Family, comprising Rahul Bhatia, Rohini Bhatia, and Kapil Bhatia, jointly holds 40,000, 10,000, and 50,000 equity shares, respectively. Additionally, Asha Mukherjee and Alok Mehta possess 8,85,688 and 1,955 equity shares in the airline, respectively. These five investors are categorized under the individuals/HUF category.

Rahul Bhatia, through his company, Interglobe Enterprises, commands the largest share in Indigo, accounting for a substantial 37.79% of the equity, with 14,57,06,774 equity shares as of June 30, 2023.

Overall, the promoter group collectively retained a 67.77% stake in Indigo by the conclusion of the June 2023 quarter. However, in the wake of Shobha's 2.99% stake sale, the promoter group's ownership has been marginally reduced to 64.78% in Indigo. This alteration will be reflected in the forthcoming shareholding pattern update for the quarter ending September 30, 2023.

During the June 2023 quarter, Indigo posted a noteworthy net profit of ₹2,974.5 crore, a remarkable turnaround from the net loss of ₹1,064.3 crore in Q1FY23. The airline's revenue from operations also demonstrated a robust year-over-year increase of 29.8%, reaching ₹16,683.1 crore. Concurrently, the airline expanded its capacity by 18.8% to 32.7 billion, while the number of passengers surged by 30.1% to 26.2 million.

Indigo is indisputably one of the world's fastest-growing low-cost carriers, distinguished by its commitment to affordable fares, punctual operations, and seamless travel experience. As of June 30, 2023, the airline's fleet comprised 316 aircraft, servicing 78 domestic and 22 international destinations.

Following an exceptional performance in Q1 of FY24, Jinesh Joshi, a Research Analyst at Prabhudas Lilladher, conveyed optimism about Indigo's prospects. Joshi emphasized the airline's favorable position for growth, attributing it to capacity expansion, network augmentation in both domestic and international markets, and a robust balance sheet with ₹157 billion in free cash.

Despite the record-breaking quarter, Joshi acknowledged certain challenges, including pressure on yields and a recent 11% increase in aviation turbine fuel (ATF) prices over the past two months. He anticipated a revenue compound annual growth rate (CAGR) of 15% over the ensuing two years, accompanied by EBITDAR margins of 25.4% and 28.1% for FY24E and FY25E, respectively. Joshi recommended a 'BUY' rating with a target price of ₹2,855, predicated on an EV/EBITDAR multiple of 7x for December 2024, with no revisions to the target multiple.

Disclaimer: The investment recommendations provided above originate from market analysts and do not represent counsel from the author or Greynium Information Technologies. It is strongly advised that users seek advice from certified financial experts before making any investment decisions

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Writer: Chintu nath