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Go Air IPO delay may force airline to borrow more, seek funds from promoters

Prospects appear dim for the airline as it competes with two rivals to raise funds and its market share shrinks ahead of the leanest quarter for air travel.

June 29, 2021 / 05:29 PM IST
Representative image

Representative image

The Securities and Exchange Board of India has kept the processing of Go Airlines (India) Ltd’s share sale documents in abeyance.

This means the carrier that’s being rebranded as Go First may have to look at other options to sustain operations until it is allowed to raise funds by listing on the bourses. The airline plans to raise Rs 3,600 crore as part of its listing on the stock exchanges, according to its draft red herring prospectus dated May 13, 2021.

The airline’s rebranding exercise hasn’t progressed beyond the website, where it came on much after full-page advertisements proclaimed the change from ‘Go Air’ to ‘Go First.’

None of its aircraft has been repainted with the new logo and even photos on websites that track aircraft deliveries show that the planes it has ordered from Airbus are being produced with the current ‘Go Air’ livery.

The company is transitioning its operations under the new brand, according to the prospectus. It applied for registration of the ‘Go First’ trademark on April 28, 2021, and the ‘Go First’ logo on May 12, 2021, and expects the trademark registration to take a few months or longer.


The airline plans to use over 50 percent of the IPO proceeds towards prepayment and scheduled repayments of borrowings. An amount of Rs 255 crore is earmarked to repay dues to Indian Oil Corporation for fuel supplies. The repayment and prepayment would have cleared a substantial portion of the airline’s total outstanding debt, which stood at about Rs 2,956 crore on April 19, 2021, helping reduce its finance costs.


A delay in the IPO means Go Air may have to wait for a few more months to raise cash, possibly through a mix of loans or an infusion of funds by the promoters.

Air traffic slumped in May and even though there’s been a moderate recovery in June, the July-September quarter is the most dreaded for airlines because it has traditionally been the leanest quarter.

The airline has gone slow on deployment of flights and as a result, its market share shrank to 6.5 percent in May from 9.6 percent in the previous month. In Mumbai, where the airline is headquartered, it operated only 120 domestic flights in May compared with 552 in April. While the total flights were down, the share of Go Air dropped to 5.3 percent of all domestic departures in May from 10.29 percent in April.

Not the only airline looking for funds

Go Air is one of three airlines that are currently looking to raise funds. IndiGo has already obtained shareholder approval to raise Rs 3,000 crore as part of a qualified institutional placement. SpiceJet will discuss raising funds at a board meeting scheduled for June 30, 2021. While IndiGo is cash rich, SpiceJet has been seen adverse remarks from its auditor and is in dire need of cash.

Although the stock market is booming and money is still flowing into India, most fund houses have limited their exposure to sectors, especially aviation, which is not known to be kind.

From an investor perspective, returns from IndiGo or the commitment to cargo and subsequent returns from SpiceJet may be the proverbial bird in hand that’s worth two in the bush. This is more so when investors are not sure when the Go Air IPO will hit the streets.

Little government support

Some countries have supported their airlines through long-term loans or stake acquisitions in return for funding. In India, with the government infusing cash to keep state-owned Air India solvent, little has been done for other airlines. With Air India on the block, it may have been awkward for the government to buy stakes in other airlines to support their operations while trying to sell shares in the national carrier.

Tail Note

Last month, the government lowered the cap on the number of flights that airlines can operate and increased the floor price for air fares. This would have helped the airline shore up some cash. However, without a full recovery, making ends meet will always be challenging. A full recovery is not in sight and until then, Go Air, like the others, will have to find ways to tide over the crisis. With the IPO delayed, the task only gets a little tougher for Go Air.

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Ameya Joshi runs the aviation analysis website Network Thoughts.
Tags: #GoAir IPO
first published: Jun 29, 2021 05:28 pm
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