IndiGo share price crash: 5 key reasons for tumble; experts slap 'sell on rise' rating on airline

IndiGo share price crash: The aviation company's stock has dipped over 12 per cent in the intraday trade on Wednesday and the stock market experts are of the opinion that the counter is expected to remain bearish till its promoters dispute and the aviation sector outlook becomes better. As per the stock market experts, the IndoGo share price would trade in the range of Rs 1260 to Rs 1450 and they have recommended the stock market investors to 'sell on rise' if the stock rises on short-covering.

Speaking on the reasons for the crash in IndoGo share price Prakash Pandey, Head of Research at Fairwealth Securities said, "Outlook for the aviation sector is already gloomy and the emergence of dispute among the InterGlobe Aviation promoters has added salt to its wounds. The stock is expected to remain bearish until the promoters dispute is settled down. Till then the IndiGo share price would remain range-bound between Rs 1260 to Rs 1450 and I would advise market investors to maintain sell on rising strategy as the stock may show some upside momentum when the short-covering takes place in the IndiGo stocks. However, an investor must maintain a short-term outlook and keep a stop loss at Rs 1450."

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जानिए क्यों आई है #Indigo में भारी गिरावट?@IndiGo6E @poojat_0211 @AnilSinghviZEE pic.twitter.com/fM40zxIjZQ

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Sebi has 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". 

Gangwal has 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 has in the meantime asked the company to give its response to this letter by July 19, 2019, with which the company will comply." 

IndiGo shares price fell around 17 per cent in early morning trade session on Wednesday after 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. 

So, here are the top 5 reasons that led to IndiGo share price crash:

1] IndiGo promoters dispute;

2] SEBI taking cognizance of IndiGo promoters dispute;

3] Aviation sector's muted quarterly outlook;

4] SEBI reaction on IndoGo response still awaited; and

5] Weak fundamentals of IndiGo that came out post-promoters dispute.