IndiGo owner InterGlobe Aviation’s IPO consists of a fresh issue of Rs 1,272.2 crore, and an offer for sale (OFS) by promoters and existing shareholders to the tune of Rs 1,997 crore.

InterGlobe Aviation, the company that runs low-cost carrier Indigo Airlines, aims to raise Rs 3,100-3,269 crore through a three-day initial public offering (IPO) that opens on October 27. The company on Monday officially announced the price band at Rs 700-765 per share.

InterGlobe Aviation’s IPO consists of a fresh issue of Rs 1,272.2 crore, and an offer for sale (OFS) by promoters and existing shareholders to the tune of Rs 1,997 crore. Existing shareholders will sell a little more than 2.61 crore shares. The company will use part of the fresh proceeds to repay debt worth Rs 1,166 crore, Aditya Ghosh, president and ED, InterGlobe Aviation, said in a media presentation.

The primary market deal values the company close to Rs 26,500 crore, nearly six times that of rival Jet Airways and nearly 10 times that of low-cost carrier SpiceJet, according to the data available with the stock exchanges.

InterGlobe’s IPO will be the biggest primary market offering since Bharti Infratel’s Rs 4,100-crore-plus public issue in December 2012, statistics compiled by Prime Database showed. The company filed its preliminary prospectus with the Securities and Exchange Board of India on June 30 and received regulatory clearance on September 11.

InterGlobe’s share sale is also the first by an Indian airline since the 2006 listing of Deccan Aviation, which was later taken over by Kingfisher Airlines. Jet Airways, then the country’s largest private airline, raised Rs 1,900 crore in February 2005.

The privately-held IndiGo is one of the two domestic carriers that makes a profit, the other being GoAir, which reportedly plans to tap capital markets as well.

According to a regulatory filing, InterGlobe reported a negative net worth of Rs 139.38 crore as of June 30. It reflects the June 30, 2015, payout of an interim dividend of Rs 1,207.08 crore for FY16, which was offset by profit after tax of Rs 640.43 crore for the three months ended June 30. The airline’s top-line stood at Rs 4,317.2 crore for the quarter.

Citigroup Global Markets, JPMorgan and Morgan Stanley are global co-coordinators and book running lead managers, along with Barclays, Kotak Investment Banking and UBS as book running lead managers.

Of the total issue size, the company is looking to raise a little more than Rs 950 crore in a pre-IPO placement on October 26. The minimum bid size is 15 shares.

A couple of months ago, IndiGo placed an order for purchase of 250 Airbus A320neo jets — the largest ever single order for Airbus aircraft by number of jets. The order is expected to be completed before the end of this fiscal.
IndiGo was founded in 2006 by entrepreneur Rahul Bhatia and Rakesh Gangwal, a former chief executive of US Airways. The airline has used its low-cost model to stay profitable and become the largest airline in the Indian aviation sector.

We maintain a ‘buy’ rating on the stock and believe that Maggi noodles should be seen on the shelves soon.The size of the brand is ~Rs 25bn in sales, and contributes to around 25% of the company’s total portfolio in terms of revenues.

This is a positive development towards the re-launch of the noodles, as Maggi can now commence manufacturing and selling its products after the newly manufactured products are cleared by the designated three laboratories. For Q3CY15, we expect a soft quarter, as there will be no sales coming in from Maggi.

We expect a revenue and EBITDA decline of ~19.5% year-on-year. For CY15, we have trimmed our estimates to take out the impact of Maggi for the year, but for CY16, we are building in revenues of Rs 1,800Cr from the sales of Maggi alone.

We have assumed that the product will be launched by the beginning of CY16, but normalized volumes will start 4-5 months after the initial launch.We have always maintained that there would be a short-term impact on sales and profitability of the company for a few quarters, but the company should be able to fix the product and bring it back to the market.

When many established private insurers are focussing on unit-linked insurance plans (Ulips), Arijit Basu, managing director and CEO at SBI Life Insurance, says they have a diversified business model and have an equal share in Ulips as well as traditional products. In an interview with Chirag Madia, Basu says there is immense potential and huge scope of scaling the business from SBI. Excerpts…..

How has been the performance of SBI Life in the current financial year? Do you think insurance industry is witnessing a recovery?

This year also we have started on a very positive note and would expect to continue our growth journey. To give a little background, in the previous financial year, overall total new business premium grew by 9-10% to Rs 5,529 crore. In the current fiscal till August, the total new business premium has grown by around 60% at Rs 2,071 crore.

While we are the largest in terms of total premium, we want to achieve this position in individual new business premium too in the private life industry space. For that matter, renewal premium last year was Rs 7,338 crore. Here we grew by around 29%, and such solid performance in renewal has led to better persistency for our company. SBI Life has taken various steps such as focus on renewals in the past few months which is as important as new business to us. Secondly, we also have a mechanism by which we can connect with our customers before their renewal
payment date, and finally, we have dedicated call centers exclusively for our customers. These initiatives have helped us connect with our customers better. These are the reasons why we are witnessing a steady rise in number of policies sold, both unit-linked insurance plans (Ulips) as well as traditional policies. So, overall, we have set high standards for this year and aim to achieve those.

Despite SBI being bancassurance channel, unlike private sector players, it has not generated enough traction in terms of policy sales/market share for SBI Life. How do you plan to ensure that the group banking channel is utilised efficiently?

We have done well even on this front if one looks at the absolute number, as 58% of our individual new business premium in the current fiscal has come from the bancassurance channel. But yes, there is immense potential, and I think we have a huge scope of scaling our business from SBI. I would like to mention that the present top management of SBI feels cross selling of their own products and subsidiary products is equally important for them and can lead to better customer retention. It also adds more to other income. At present, there are around 30,000 specified persons and we plan to recruit another 3,000 this year to help ramp up the bancassurance channel.

Currently, SBI has 16,000 branches and insurance is actively sold only from 4,000 branches. Each contributing branch of SBI contributes around R31 lakh of new business premium in a year for our company. For our immediate rivals, the corresponding number is around R50 lakh. For other bank-promoted companies, it will not be even R2-3 lakh. We would like to take this number to R40-45 lakh per branch in the next two-three years. We are working to ensure more branches sell our policies.

When do you plan to become number one player in the industry? Have you chalked out any plans to achieve that target?

Globally, new business premium is considered as a benchmark for growth and SBI Life is no 1 in terms of total new business premium among private life insurers. In terms of assets, the gap with the no. 1 player is fast narrowing down and we intend to take the no 1 position in all parameters very soon. Around 32% of our total new business premium comes from selling group insurance policies, while other players have little share in selling group insurance policies, but we want to keep the business as diversified as possible. We are already no. 1 in total new business premium segment and number of policies sold. I would also like to add that other top players in the insurance industry focus more on Ulips and over 70% of their first year premium come from that segment. But, we have a diversified business model and have equal share in Ulips as well as traditional products.

What are your new marketing and distribution strategies for 2015-16?

We want to continue to focus on bancassurance channel and go extensively into online sales, which are widely accepted by the new generation of customers. We plan to use untapped potential in bancassurance channel in proper way and effectively use the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).

Has your foreign partner initiated the process of raising its stake? Do you plan to list the company?

The work on stake sale is on and SBI plans to sell 10% of its stake to BNP Paribas Cardif (currently, it holds 26% in the venture) and by the end of this financial year, the deal might get finalised. For listing, thoughts are already in the minds of both the partners, but it’s not the immediate priority for any of them.

India has come up as an early leader in Asia’s incipient green bond market and is expected to be a prominent driver of regional issuance in coming years, Moody’s Investors Service today said.

“India has established itself as an early leader in Asia’s nascent green bond market, with three India-based issuers coming to market in the third quarter(July-Sept)”, Moody’s senior Vice President Henry Shilling said in a statement.

“We expect India, along with China, to be a prominent driver of regional issuance in coming years, given ambitious targets on building out renewable energy capacity,” Shilling said.

India has set a target of 175 GW of renewable energy capacity by 2022.

Moody’s further said that global green bond issuance reached USD 7.5 billion in the third quarter of 2015, lifting year-to-date green bond issuance to USD 27.2 billion.

Though down from Q2, Moody’s expects issuance will pick up in the last quarter (October-December) and exceed USD 40 billion for the full year 2015.

“Issuance continued to break new ground in the third quarter in terms of noteworthy and first-time transactions, such as the first green bond transaction by a Chinese issuer,” Shilling said.

Moody’s conclusions were contained in its just-released report on the global green bonds market — ‘Third Quarter Issuance Lags, but COP21-Linked Increase Is Likely.’

The report further said that nearly half of the third quarter’s issuance proceeds or about USD 4 billion are being earmarked for renewable energy projects. This is followed by 18.8 per cent or about USD 1.7 billion earmarked for sustainable water management followed closely by USD 1.6 billion allocated to energy efficiency projects.

Investment-grade issuance continued to dominate in the third quarter but high-yield green bonds gained as a share of all Moody’s-rated green bond transactions, it said.

Nearly 18 per cent of issuance in the third quarter was attributable to below-investment grade issuers, up from just 5 per cent in the second quarter, it added.

Furthermore, green bond performance registered a slight gain in the third quarter.

The July-September period also saw more standard-setting initiatives aimed at bolstering green bonds standards as well as issuance, it said.

IndiGo had increased the pricing on the issue to Rs 700-765 after the promoters decided to divest lesser number of shares. (AP)

Set to hit the capital markets with Rs 3,268 crore IPO next week, InterGlobe Aviation today said it will retire nearly one-third of its total debt of Rs 3,912 crore from the share-sale proceeds.

InterGlobe Aviation is the holding company of IndiGo airline. The company said it will retire Rs 1,166 crore out of its Rs 3,912-crore debt from the IPO proceeds.

Stating that the airline has not a single penny in working capital or non-aircraft purchase related debt, company President Aditya Ghosh said the entire Rs 3,912-crore debt it has is related to aircraft purchases. Out of its nine years of existence, it has been profitable in seven years, he claimed.

“For us the company turning a negative networth of Rs 139 crore is a non-event”, Ghosh said.

It happened on June 30, when the company declared an interim dividend of Rs 1,500 crore to the promoters. Since then the networth has turned positive and it remains so. As of now “we have a cash balance of over Rs 3,500 crore on our books”, he said.

“We had to report that we had negative networth for disclosure purposes as we happened to file our IPO papers with the Sebi on June 30. But let me repeat, that is a non-event as far as IndiGo and InterGlobe are concerned, ” Ghosh said while formally announcing the IPO.

When asked about hefty payouts the promoters have been getting all these while, he said, “As a manager my mandate is to keep my customers happy, my employees happy and also investors/shareholders. I have been doing as a private company and will continue to do so as public company going forward.”

Ghosh said the company will launch its Rs 3,268-crore public issue, the first from the airline sector after the Spicejet IPO, on October 27 which will remain open till October 29. The Rs 10-share has been priced at Rs 700-765.

The public issue includes a share premium consisting of a fresh issue aggregating up to Rs 1,272.2 crore and offer for sale of up to 26,112,000 shares, comprising 3,290,419 shares by InterGlobe Enterprises; 3,006,000 shares by Rahul Bhatia who will retain just 40,000 share post-issue thus practically exiting the airline’s direct holding.

When asked about the public perception about Bhatia, who has been the face of the airline from day one, Ghosh said that even after the issue both the key promoters (Bhatia and Rakesh Gangwal) will hold over 47 per cent each in the holding company, which in turn own the airline.”

IndiGo had increased the pricing on the issue to Rs 700-765 after the promoters decided to divest lesser number of shares. Earlier, the plan was that existing shareholders would sell up to 3.01 crore shares but as per the final offer document, this quantum has been reduced to 2.61 crore shares.

InterGlobe had reported Rs 640.44 crore in net income in the June quarter but its net worth slipped to a negative Rs 139.39 crore as of end June.

“The net worth of our company was Rs 426.22 crore and (-) Rs 139.39 crore as of March 31, 2015 and June 30, 2015, respectively, as per the restated financial statements of our company prepared in accordance with Indian GAAP and restated in accordance with the ICDR Regulations,” it said in the offer document.

Noting that it had a net negative worth at the end of June, InterGlobe said if this financial position continues, it may be “more difficult or expensive to obtain future financing or meet our liquidity needs”.

“Further, there can be no assurance that we will be able to achieve a positive net worth in periods going forward,” the document said.

Net worth is the aggregate of the paid-up share capital, share premium account, reserves and surplus. The figure excludes aggregate of miscellaneous expenditure. A negative net worth implies the company’s liabilities are more than its assets.

In the June quarter, IndiGo posted total revenue of Rs 4,317.19 crore. For the year ended March 2015, the carrier recorded a net profit of Rs 1,295.58 crore on revenues of Rs 14,309.14 crore.

The Gurgaon-based entity is also the largest domestic carrier by market share, having flown over one-third of the total passenger traffic carried by Indian airlines in August.

The other shareholder who will be divesting stake include another equal promoter Rakesh Gangwal divesting 3,759,638 shares, 601,200 by Anil Chanana; 149,900 by Asha Mukherjee; 300,600 by Kunal Chanana; 6,012,000 by Newton Bruce Ashby; 100,200 by Sanjay Kumar; 84,000 by Shakti Swarup Lumba; 2,227,316 by Shobha Gangwal; 1,442,000 Steven Eugene Harfst; 1,503,000 by Paul Carl Schorr, Iv (Nominee of G5 Investments) and 3,635,727 by

The Chinkerpoo Family Trust in which Shobha Gangwal is a trustee & JP Morgan Trust Company of Delaware).

The global coordinators & book running lead managers to the issue are Citigroup India, JP Morgan India and Morgan Stanley India, while the book running lead managers are Barclays, Kotak Mahindra Capital Company and UBS Securities India.