Analysts Say Promoter Dispute To Hit IndiGo’s Share Price

Analysts expect the ongoing spat between the promoters of InterGlobe Aviation Ltd. to impact the share price of India’s largest airline.

While Credit Suisse expects the escalation of promoter dispute to be a significant headwind for the operator of budget carrier IndiGo, Citi Research said uncertainty regarding the final resolution could hit its stock price.

The research firms, however, don’t expect the ongoing issues to resolve anytime soon. Credit Suisse said though the dispute doesn’t seem to have any meaningful operational impact yet, such an impact can’t be ruled out, particularly in case of a public dispute.

After months of speculation over the reasons for the rift between the promoters of IndiGo, Rakesh Gangwal accused co-promoter Rahul Bhatia of questionable related party transactions, and violations of governance regulations and the company’s code of conduct. Gangwal, who owns 37 percent in IndiGo’s parent, listed several allegations against his co-promoter Bhatia, who owns 38 percent stake, in a letter to the market regulator.

Gangwal also sought an extraordinary general meeting of the airline’s shareholders to address the governance issues he has raised against co-promoter Bhatia.

Shares of IndiGo tumbled as much as 19 percent—the most since May 3, 2018—to Rs 1,265 apiece.

Here’s what the brokerages have to say about the promoter feud:

Citi Research

• Maintains ‘Sell’ with a target price of Rs 1,300
• Conflict between promoters is more than just minor differences.
• Don’t envisage a settlement anytime soon.
• Uncertainty regarding final resolution could cause weakness in stock price.

Credit Suisse

• Maintains ‘Outperform’ with a target price of Rs 1,900.
• Control and related party transactions are at the center of dispute.
• Dispute does not seem to have had any meaningful operational impact so far.
• However, an operational impact cannot be ruled out, particularly in case of a public dispute.