• IndiGo's parent company, InterGlobe Aviation, offloaded shares worth Rs 11,000 crore in a block deal.
• Rakesh Gangwal, IndiGo's co-founder, is the likely seller, reducing his stake in the company.
• Despite the stake sale, IndiGo maintains a strong market share, carrying over 5.61 crore passengers in the first seven months of the year.
• The block deal marks a significant change in the ownership structure of India's largest airline.

In a significant development in the Indian aviation sector, shares worth Rs 11,000 crore were offloaded in a block deal involving InterGlobe Aviation, the parent company of IndiGo, India's largest airline by market share. The deal, which took place on August 29, saw approximately 2.3 crore shares change hands at a floor price of Rs 4,760 apiece. This transaction led to a marginal fall in IndiGo's share price in the morning trade on the day of the deal.

The likely seller in this block deal is Rakesh Gangwal, the promoter and co-founder of IndiGo. Multiple reports suggest that Gangwal was expected to offload nearly 5.8 per cent of his stake in InterGlobe Aviation. At the end of the June quarter, Gangwal held a 5.89 per cent stake in IndiGo. This move is seen as part of Gangwal's plan to gradually reduce his holdings in the company after stepping down from the board in February 2022.

Interestingly, earlier reports had suggested that Gangwal was aiming to sell a stake valued at Rs 6,750 crore. However, this amount was later increased to Rs 11,000 crore. This is not the first time Gangwal has pared his stake in the company. Previous block deals have seen him gradually reducing his holdings in a bid to exit the airline.

Growth Amidst Stake Sale

The block deal comes at a time when the domestic air passenger traffic in India has been growing steadily. According to the latest data by the Directorate General of Civil Aviation (DGCA), the domestic air passenger traffic in the country grew 4.7 per cent (year-on-year) to over 9.23 crore in the January-July period, up from more than 8.81 crore during the corresponding period of the previous year.

During this seven-month reporting period, IndiGo carried more than 5.61 crore passengers, clocking a massive market share of 60.8 per cent. This was followed by Tata Group-run Air India, which flew over 1.25 crore passengers with a 13.6 per cent market share, and Vistara, which registered a market share of 9.6 per cent with 89 lakh air passengers.

Despite the growth in passenger traffic, IndiGo's financial performance in the recent quarter has been mixed. The airline reported a net profit of Rs 2,728 crore for the April-June quarter, marking a drop of 11.7 per cent from Rs 3,090.6 crore in the same quarter last year. However, the operational revenue of the airline went up 17.3 per cent to Rs 19,570.7 crore in Q1 FY25, as compared to Rs 16,683.1 crore in the same quarter the previous year.

Historical Similar Events and Conclusion

This block deal is reminiscent of similar events in the past where promoters have offloaded their stakes in major companies. Such moves are often driven by a variety of factors, including personal financial planning, strategic business decisions, or changes in the overall business environment. In the case of Gangwal, his decision to sell his stake in IndiGo appears to be part of a planned exit strategy following his departure from the company's board earlier this year.

As the sector continues to navigate the challenges posed by the ongoing pandemic, such developments will be closely watched by industry observers and stakeholders. The deal underscores the fluidity of the aviation market and the strategic decisions that key players like Gangwal make in response to changing market dynamics.