InterGlobe Aviation Limited, the operator of India’s largest domestic airline IndiGo Airlines, has shortlisted four investment banks to help raise funds of up to Rs 3,000 crore, as it looks to bolster its balance sheet and tide over the Covid-19 turbulence in the aviation industry, people familiar with the matter told Moneycontrol.
Rivals SpiceJet and Wadia-group promoted GoFirst ( formerly GoAir) are also exploring plans to raise money. SpiceJet is looking to raise Rs 2,500 crore to fund working capital requirements while GoFirst is eyeing the IPO route which has been put on hold temporarily by Sebi.
“Citi, JP Morgan, BNP Paribas & Morgan Stanley have been taken on board as advisors for the IndiGo QIP (qualified institutional placement),” said one of the persons cited above.
A second person said based on market conditions, the IndiGo QIP may be launched in August 2021. “But no final call has been taken as yet and timelines haven’t been frozen and may change later.”
A third person said IndiGo is looking to raise up to Rs 3,000 crore and that money will create a buffer for the airline during these uncertain times.
All the three persons spoke to Moneycontrol on the condition of anonymity.
In response to an email query from Moneycontrol, InterGlobe Aviation said, “The company has taken the approval of its Board of Directors and its shareholders to raise funds of up to Rs 3,000 crore by issue of equity shares through a Qualified Institutions Placement (QIP) and the same has been duly intimated to the Stock Exchanges. Going forward, the company will decide on next steps in relation to the QIP in the course of its business and depending on various considerations.”
JP Morgan, BNP Paribas and Citi declined to comment. Moneycontrol is awaiting an email response from Morgan Stanley.
On June 5, Interglobe Aviation said it had registered a consolidated year-on-year net loss of Rs 1,147 crore in the fourth quarter of FY 2020-21, which ended on March 31, 2021. The airline had posted a loss of Rs 870.8 crore in the year-ago period. Apart from the consolidated loss, the airline's revenue from operations dropped 25 percent to Rs 6,222 crore in the March quarter as against Rs 8,299 crore in the corresponding quarter in the previous year.
"This has been a very difficult year with our revenues slumping hard due to COVID. After showing some signs of recovery during the December-to-February period, revenues slumped again with the second wave of COVID," IndiGo CEO Ronojoy Dutta said.
Dutta said the company has seen a sharp decline in revenues in March through May and is encouraged by the modest revenue improvements starting last week of May and continuing through June. The firm’s stock has risen by 7 percent in the last 3 months while Spice Jet’s share price has risen by 9 percent during the same phase.
THE IMPACT OF COVID -19 ON THE INDIAN AVIATION SECTOR
Travel restrictions, uncertain travel schedules and the fear psychosis over the second wave of Covid-19 have severely impacted the business of domestic airlines. In May 2021, in a report titled ‘Key Trends in Indian Aviation in FY2022: Impact of Second Wave’, aviation consultancy firm CAPA said that IndiGo would be the only carrier to emerge significantly stronger from the Covid-19 crisis because of its strong balance sheet.
“Most Indian airlines were already very vulnerable prior to the outbreak, with weak balance sheets and poor liquidity. Covid inflicted massive losses and led to an increasing debt burden on carriers that were structurally ill-equipped to absorb this impact," it said.
“Consolidation is inevitable and will be strategic in nature. It could result in a two to three airline system in the near to medium term," the report added.
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