IndiGo crashes 19% on promoter feud; here's what analysts say
Citi group said that the conflict between the promoters is more than just minor differences.
NEW DELHI: Shares of InterGlobe Aviation (IndiGo) crashed 19 per cent in Wednesday’s trade as one of the promoters Rakesh Gangwal approached Sebi over alleged corporate governance issues at the airline.
It declined 19 per cent on NSE to hit a low of Rs 1,264.85. The shares hit their lowest since March and were on course for their worst day since January 2016.
Gangwal held 37 per cent stake in the airline as of the latest filing. Co-promoter Rahul Bhatia, on the other hand, owned 38 per cent stake in the airline.
Gangwal alleged that a shareholders’ agreement gave Bhatia unusual controlling rights over the company. He suspected that the rights and a lack of diversity and paucity of independent directors may be at the root of why governance matters have taken a back seat at IndiGo.
“The dispute has entered a level where internal resolution is almost a negligible possibility. The most disturbing fact is that Gangwal have received company reports and facts, which raise an alarm towards the related part transactions with companies that are alleged to be given contracts without any bids or audit committee approval,” said Sameer Kalra, Founder at Target Investing.
Kalra noted that the facts are not available to minority shareholder and that approaching Sebi action would lead to a further issue rather than a resolution anytime soon, which would impact the valuations and corporate governance premium. The analyst has a sell rating on the stock.
Citi group said that the conflict between the promoters is more than just minor differences. It took does not see a settlement anytime soon.
Uncertainty regarding final resolution could cause weakness in the stock price, it said. The brokerage has a sell rating on the stock with a target of Rs 1,300.
Credit Suisse said that the dispute does not seem to have had any meaningful operational impact so far, but an operational impact cannot be ruled out, particularly in case of a public dispute, it said.
The scrip fell 17.54 per cent to hit a low of Rs 1,291 on BSE.
Interglobe has risen 34 per cent this year, thanks partly to the decline of cash-strapped competitor Jet Airways, after which IndiGo and other airlines raced to take Jet's coveted slots at airports, Reuters reported.
It declined 19 per cent on NSE to hit a low of Rs 1,264.85. The shares hit their lowest since March and were on course for their worst day since January 2016.
Gangwal held 37 per cent stake in the airline as of the latest filing. Co-promoter Rahul Bhatia, on the other hand, owned 38 per cent stake in the airline.
Gangwal alleged that a shareholders’ agreement gave Bhatia unusual controlling rights over the company. He suspected that the rights and a lack of diversity and paucity of independent directors may be at the root of why governance matters have taken a back seat at IndiGo.
“The dispute has entered a level where internal resolution is almost a negligible possibility. The most disturbing fact is that Gangwal have received company reports and facts, which raise an alarm towards the related part transactions with companies that are alleged to be given contracts without any bids or audit committee approval,” said Sameer Kalra, Founder at Target Investing.
Kalra noted that the facts are not available to minority shareholder and that approaching Sebi action would lead to a further issue rather than a resolution anytime soon, which would impact the valuations and corporate governance premium. The analyst has a sell rating on the stock.
Citi group said that the conflict between the promoters is more than just minor differences. It took does not see a settlement anytime soon.
Uncertainty regarding final resolution could cause weakness in the stock price, it said. The brokerage has a sell rating on the stock with a target of Rs 1,300.
Credit Suisse said that the dispute does not seem to have had any meaningful operational impact so far, but an operational impact cannot be ruled out, particularly in case of a public dispute, it said.
The scrip fell 17.54 per cent to hit a low of Rs 1,291 on BSE.
Interglobe has risen 34 per cent this year, thanks partly to the decline of cash-strapped competitor Jet Airways, after which IndiGo and other airlines raced to take Jet's coveted slots at airports, Reuters reported.