KOCHI: Cochin International Airport Ltd (CIAL) surprised many investors recently when its Chairman and Kerala Chief Minister Pinarayi Vijayan told shareholders that the company has “no plans” to go public – citing regulatory constraints on debt-equity ratio as the reason.
The comment came in response to queries raised by shareholders during CIAL’s recent Annual General Meeting (AGM), where 13 registered speaker shareholders had the opportunity to raise their concerns.
But it was the Chairman’s response on the listing prospects that has since left market observers scratching their heads.
“The listing of shares is possible only through an Initial Public Offer (IPO). Considering the regulatory requirements pertaining to the debt-equity ratio, CIAL currently has no plans to go for an IPO,” the Chairman stated – adding that this had been conveyed at previous AGMs as well.
However, this reasoning has been challenged by analysts and investors alike.
A senior chartered accountant based in Thrissur told businessbenchmark.news, “I am confused as to which debt-equity norm is being cited here. SEBI’s regulation for mainboard IPOs mandates a debt-equity ratio below 2:1 – that is, total debt should not exceed twice the equity. But CIAL’s numbers are nowhere close to breaching that threshold.”
CIAL’s financials as of March 31, 2024, support that claim. The company’s total debt stood at Rs494.51 crore – less than one-fourth of its equity base of Rs2,254.56 crore, translating into a debt-equity ratio of just 0.22:1, far below SEBI’s ceiling.
Grey market speculation
With no official listing, CIAL shares continue to trade in the grey market at a reported Rs425–450 range. But the price discovery mechanism is opaque at best.
“What’s the real basis of that price is anyone’s guess,” the chartered accountant quipped.
At Rs450 per share, CIAL’s implied price-to-book value (P/B) stands at an elevated 9.3 times, given its book value of around Rs48.
The earnings multiple too is steep – at over 50 times, considering its earnings per share (EPS) of Rs8.77 in FY24. Market veterans say these valuations are unsustainable for a public-sector-backed airport operator, and yet the shares remain in demand.
Meanwhile, retail shareholders are caught in the middle. Without an official market or public disclosures on price, many say they are left directionless – some even falling prey to middlemen buying at steep discounts to grey market rates.
“I’ve heard cases of shareholders selling their shares at Rs250–300 because they weren’t aware of the prevailing grey market rate,” said one investor advocate.
Who holds the power?
While the Kerala government holds the largest stake in CIAL at 33.38 per cent, MA Yusuff Ali owns 12.11 per cent making him the second-largest shareholder. NV George follows with 5.94 per cent, as per FY24 filings.
With such heavyweight shareholders on board and a strong financial profile, the repeated deferral of a formal listing continues to confound small investors.
The question remains: if not now, then when?
