IndiGo share price crash: Rakesh Gangwal and Rahul Bhatia row to gloom in the aviation industry, check 5 key reasons
IndiGo share price has plunged by over 5 per cent in the intraday trade on Thursday.
IndiGo share price crash: lnterGlobe Aviation Company's stock price crash landed in double digits on Wednesday and today that heavy selloff in the counter still continues as the stock has once again nosedived to the tune of over 5 per cent. At 10:53 AM, the IndiGo share price was trading at Rs 1326.70 per stock, which is below 5.1 per cent from its Wednesday close. This crisis has emerged out into the open because of the row between co-promoters Rakesh Gangwal and Rahul Bhatia.
According to stock market technical and fundamental experts, the IndiGo share price is range-bound and its current range is Rs 1260 to Rs 1450 and the sentiment of the stock is 'overall bearish.' They are recommending 'sell on rise' in the aviation counter.
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Elaborating upon the reasons for the negativity that is impacting IndiGo share price, Prakash Pandey, Head of Research at Fairwealth Securities said, "Aviation stocks are already under pressure post-Jet Airways crisis and emergence of recent dispute among the InterGlobe Aviation promoters has added further injury to both aviation sector and the company's counter. IndiGo stock is expected to remain bearish until the promoters dispute gets settled down. Currently, the IndiGo share price is range-bound between Rs 1260 to Rs 1450. I would recommend market investors to maintain sell on rising strategy as the aviation stock may show some upside when the short-covering takes place in in today's F&O expiry. However, an investor must maintain a short-term outlook and keep a stop loss at Rs 1450."
Pandey listed out the following five reasons for IndiGo share price crash landing:
1] Emergence of IndiGo promoters dispute;
2] SEBI getting active on IndiGo promoters dispute;
3] Gloomy outlook for aviation stocks;
4] Stock market investors awaiting SEBI reaction on IndoGo response; and
5] Weak fundamentals of the IndiGo stocks that became public post-promoters dispute.
IndiGo shares price fell around 17 per cent in early morning trade session on Wednesday after the emergence of the dispute between its promoters came out in the open. Airline co-promoter and former US Airways Chief Executive and Chairman Gangwal came on record to lodge his grievances against various issues pertaining to IndiGo.
In his letter to Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi and other top officials, Gangwal lamented that IndiGo has started veering off from the core principles and values of governance that made IndiGo what it is today. He raised serious objections to related party transactions in the company, stating that various fundamental governance norms and laws were not being adhered to. He warned that this will lead to unfortunate outcomes if effective measures are not taken. Gangwal had sought regulatory intervention from market regulator Sebi to resolve the issues. He, along with his affiliates, hold a 37 per cent stake in IndiGo while the other co-promoter, Rahul Bhatia, has 38 per cent equity stake.
Sebi had sought a response from IndiGo on the alleged grievances raised by co-founder Rakesh Gangwal. IndiGo in its BSE regulatory filing said, "... We inform you that the Board of Directors of lnterGlobe Aviation Limited has received a letter dated July 8, 2019, from Rakesh Gangwal, the copy of which is already with the Stock Exchanges, informing the company that he has written a letter to Sebi seeking regulatory intervention on his alleged grievances".
"Sebi has in the meantime asked the company to give its response to this letter by July 19, 2019, with which the company will comply."