GoFirst may launch IPO in July-September as sentiment improves over aviation stocks

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GoFirst, the budget airline previously known as GoAir, plans to launch its delayed initial public offering to raise Rs 3,600 crore in the second quarter of this financial year following a revival in market sentiment over aviation stocks.

“Over 27 investors have shown positive interest. The company will make a fresh presentation soon,” a person aware of the airline’s plans said.

Another person said GoFirst is optimistic about its IPO as domestic and overseas air travel opens up with no expectations of another Covid-19 wave.

“Domestic air traffic rising to above the pre-Covid-19 levels, coupled with a recovery in the stocks of aviation companies, has once again increased the appetite of bankers,” another person said.

Shares of InterGlobe Aviation, the operator of IndiGo, the country’s biggest airline, have jumped 8.1 percent over the past three days, while stocks of SpiceJet have rallied 7 percent in the same period.

India’s aviation sector has been recovering as people resume leisure and official travel after over two years of pandemic-related restrictions. However, the price of aviation fuel, the biggest cost component for airlines, has risen sharply, and competition is set to intensify as two additional carriers take to the skies.

Like other airlines, GoFirst is betting on rising demand for leisure travel during the summer vacation to combat rising fuel prices, people aware of the matter said. The carrier expects the government to lift fare caps and include aviation turbine fuel in the goods and services tax regime to help the aviation sector.

Jet fuel

Aviation turbine fuel prices have shot up almost 90 percent since May 2021. Jet fuel prices were increased by 5.3 percent on May 16 – for the 10th straight time – and now costs Rs 1,23,039.71 per kilolitre in New Delhi.

GoFirst plans to use Rs 2,200 crore to be raised from the IPO to reduce debt and repay lessors. The remaining Rs 1,600 crore will be deployed to increase the airline’s operations in India and internationally, including adding flights to Indonesia, Malaysia, Singapore, Sri Lanka, and Nepal.

The airline expects domestic passenger traffic to surpass pre-Covid levels by 5-10 percent by the second quarter of 2022-23 in the absence of a new wave of Covid-19.

The airline plans to convert its entire fleet of Airbus A320 Neos and Airbus A320 Ceos to Airbus A321 Neos. The airline currently has 52 A320 Neos and 6 A320 Ceos in its fleet. GoFirst plans to take deliveries of 10 aircraft per year until 2023-24 and another 72 aircraft will be delivered between 2023-24 and 2026-27.

The airline had delayed its IPO plans in August 2021 after the Securities and Exchange Board of India called the promoters, the Wadias, for a pending inquiry. In December 2021, GoFirst further delayed the offering due to the outbreak of the Omicron wave and then the Russia-Ukraine war that started in February.

Meanwhile, competition is set to intensify in the aviation sector as one new airline and another grounded carrier start flying later this year. Rakesh Jhunjhunwala-backed Akasa Air is set to start commercial operations in July, CNBC-TV18 reported on May 6. The airline expects to receive its first aircraft by early June. Jet Airways, under its new owners, may start flying this year.

The IPO markets have slowed this year after record funds were raised in FY22. Indian companies sold shares worth $995 million in the January-March quarter of 2022 compared to $2.57 billion during Q1 of 2021, according to EY Global IPO Trends. That was a decline of 60 percent in proceeds raised.

The mega Rs 21,000 crore IPO of Life Insurance Corporation of India made a tepid debut on the stock exchanges earlier this week and listed at a discount to the issue price.