IndiGo IPO to 're-rate' domestic aviation sector: CAPA

New Delhi: IndiGo's IPO, valuing its parent company at over USD 4 billion, is a significant milestone for the domestic aviation sector that has been grappling with adverse conditions over the last many years, says a report.

Aviation think tank Centre for Asia Pacific Aviation (CAPA) Tuesday said carrier's success is more valuable as the market conditions over last 9-10 years have been extremely adverse, it noted.

ALSO READ: InterGlobe Aviation IPO off to flying start; subscribed 87%

The Rs 3,018-crore initial share sale of IndiGo's parent InterGlobe Aviation today began on a promising note as the issue was subscribed 87 percent on the first day itself.

CAPA said IndiGo's very successful IPO, that values the company at USD 4-4.2 billion is a significant milestone for the entire industry and would "structurally re-rate the sector".

"IndiGo's valuation also reflects a very strong confidence in the India's aviation story especially with massive growth upside for next 3-4 decades," CAPA said, while adding that more low cost carriers are expected to get listed in the next 1-2 years.

According to the think tank, other airlines are expected to benefit strategically post IndiGo's IPO including a possible further upside in the listed stocks especially after third quarter results.

"More airline IPOs to follow as industry in India is at the top of a favourable cycle with lower fuel prices, stable rupee, around 15 percent domestic and closer to 10 percent international growth in the near term driven by 7- 8 percent GDP growth.

"A supportive and well structured aviation policy which removes structural barriers- both regulatory and fiscal- will further strengthen the aviation industry in India," it noted.

With regard to IndiGo, CAPA said the carrier's next steps should include further strengthening of management structures, lesser dependence on few people at the top to broad base and institutionalise management depth.