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Gangwal to sell Indigo stake for $250m

MUMBAI/NEW DELHIIA : Rakesh Gangwal, co-founder of India’s largest airline, IndiGo, will sell up to 2.8% stake in Interglobe Aviation Ltd through a block deal that will net him at least $250 million, under deal terms reviewed by Mint.

The selling shareholders are Rakesh Gangwal, Shobha Gangwal and The Chinkerpoo Family Trust, together the Rakesh Gangwal promoter group, which owned a 36.6% stake in the airline as of June 30.

Shares of InterGlobe Aviation will be offered to institutional buyers at a floor price of 1850 each, a 6.5% discount on the closing price of 1,977 per share on the NSE on Wednesday.

At the bottom price, the sale of the stake will at least bring the Gangwal promoter group 1,996 crore, or $250 million.

Investment Banks Morgan Stanley India Co. pvt. Ltd, Goldman Sachs (India) Securities Pvt. Ltd and JP Morgan India Pvt. Ltd are the brokers of the block trading. The block trade will be conducted on September 8.

InterGlobe Aviation Ltd, which operates IndiGo, was founded in 2006 by businessman Rahul Bhatia and aviation veteran Rakesh Gangwal.

A dispute between the two founders became public in July 2019 when Gangwal filed a complaint with the market regulator over issues related to corporate governance and related party transactions at IndiGo. The two promoters had also approached the London Court of Arbitration to resolve the dispute, where the final ruling fell on September 23, 2021. The court had given 90 days to execute the order. While the details of the prize have not been made public, it is believed to have benefited Gangwal.

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The feud finally came to an end when the two promoters convened an extraordinary general meeting in December to lift restrictions on the transfer of promoter shares and amend the articles of association. The resolution was passed, paving the way for the promoters to water down their efforts. Within two months, Gangwal announced his resignation from the board of IndiGo on February 18, 2022. He had further announced that he would “slowly reduce” his equity stake in the airline over more than five years in order to diversify his holdings.

“While new investors should take advantage of the potential future growth in the company’s share price, a gradual reduction in my stake should also allow me to reap some of the benefit. Like any plan, future events may affect my current thinking,” Gangwal said on Feb. 18, adding that he will consider rejoining as a board member in the future.

According to July data from the Directorate General of Civil Aviation, IndiGo is the largest airline in India, with a market share of 58.8%. The airline recently posted a second consecutive quarter of losses 1,064 crore despite strongest quarterly revenue performance on 13,019 crores. With a fleet of more than 275 aircraft, IndiGo currently operates approximately 1,600 daily flights to 74 domestic and 26 international destinations.

In June, Bhatia’s InterGlobe Enterprises held a 37.83% stake in the airline, while Rakesh Gangwal Group, comprising Rakesh Gangwal, Shobha Gangwal and Chinkerpoo Family Trust, owned 36.6%. The Gangwal Group’s commitment is worth it 27,972.68 crore based on IndiGo’s closing price on Wednesday.

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