InterGlobe to Buy into Virgin Australia?

You may not have heard of InterGlobe before, but if this happens you certainly will. Business Today in New Delhi is reporting today that InterGlobe Enterprises has come to an agreement to participate in the purchase of Virgin Australia. (‘VA’) Only last week, the organisation denied any interest.

The company is IndiGo’s largest shareholder. Led by entrepreneur Rahul Bhatia, InterGlobe owns 38% of IndiGo, while a further 37% is owned by the family of Rakesh Gangwal.

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Virgin Australia went into bankruptcy on 21st April as a result of plummeting demand. The demise of VA places 16 000 people’s job in jeopardy and would give Qantas Airways a monopoly in Australia. The Australian government rejected VA’s request for a A$1.4 billion loan and consequently the airline appointed Deloitte as the administrator to lead the sale process. Business Today reports that more than ten parties have shown interest in the sale, of which unusually three are Australian states: Queensland, New South Wales and Victoria.

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This appears to be the first time that an Indian entity has bid for a share in a foreign airline, whereas foreign companies buying into Indian airlines is relatively common. Clearly InterGlobe has healthy cash reserves as one must assume that they have set aside sufficient funds to assure IndiGo’s survival and still have significant amounts available to invest. Or gamble?

Since it is bound by confidentiality agreements, InterGlobe said that it is unable to comment further on the bid.

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