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The Foreign Investment Promotion Board has approved the restructuring of shareholding in low-cost airline IndiGo. Approval by the inter-ministerial body headed by the Finance Secretary Arvind Mayaram means that investments by one of the promoters of the airline will be treated as investments by a Non-Resident India (NRI), thus vacating the place for foreign direct investment in the airline. Indigo is the only profit-making airline in the country.
Shares to FIIsThe proposed restructuring will make IndiGo eligible to sell shares to FIIs, a significant move at a time when the airline is planning an IPO (Initial public offering) early next year. IndiGo is also going to induct Bank of Baroda’s former chairman MD Mallya on its board.
The airline is promoted by InterGlobe Aviation, which has 48 per cent equity holding in the airline through Rakesh Gangwal’s US-based Caelum Investments. The remaining 52 per cent is owned by Rahul Bhatia.
Before the FIPB nod for restructuring, investments by Caelum Investments were treated as FDI. This prohibited further FDI in the airline as regulations prescribe a 49 per cent cap in FDI.
IndiGo had approached the FIPB to convert Gangwal’s stake from FDI to NRI investments, making the airline eligible for FDI, as in the case of Jet Airways, which was almost 80 per cent owned by founder Naresh Goyal’s NRI investments from Isle of Man-based Tale Winds at the time when Etihad was allowed to pick up 24 per cent stake in it.
NRIs can hold up to 100 per cent stake in an Indian airline.
Caelum Investments is also mainly owned by NRIs, with Gangwal and his wife having 60 per cent stake in it. The plan is to merge Caelum with InterGlobe Aviation. In place of the 147,000 equity shares held by Caelum in InterGlobe Aviation, the latter will issue an equal number of shares at a face value of ₹1,000 each to Caelum’s NRI members.
A number of foreign carriers such as Qatar Airways have expressed an interest in buying a stake in the airline. The promoters, however, have not responded to these offers.
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