InterGlobe Aviation makes decent debut, surges 17% on BSE

NEW DELHI: InterGlobe Aviation, the owner of low-cost carrier IndiGo, had a flying start on the bourses on Tuesday, with the stock listing on the BSE at Rs 856, a 12 per cent premium over the issue price of Rs 765.

The opening was better than the Rs 27-29 premium that grey market participants were expecting.

The stock of the airline company closed 14.83 per cent higher at Rs 878.45 ending a stellar opening day for the share on the bourses.

"IndiGo, by virtue of being the leader in the fastest growing aviation market underpinned by structural cost advantage and expansion strategy, is set to add wings, justifying premium valuations. We value the company at 8 times FY17E EV/EBITDAR to arrive at fair price of Rs 981 per share. We initiate coverage with a buy recommendation," Edelweiss Securities said in a note.

"A sharp uptick in ATF prices, adverse regulations and infrastructure bottlenecks are key risks to our call," the brokerage said.

The Rs 3,000 crore IPO, which was sold between October 27 and 29, was subscribed 6.15 times. It was the biggest IPO in the domestic market since Bharti Infratel's over Rs 4,000 crore issue in December 2012.

InterGlobe had raised Rs 832 crore from anchor investors before the public offering. IndiGo has a fleet of 98 aircraft and about 75 of them are on operating lease - a business model which has helped it lower costs.