The stalled Rs 3,600-crore initial public offering (IPO) of GoFirst is now on track to hit the stock exchanges by October or latest by November after the low-cost airline’s promoters, the Wadias, were able to resolve a pending enquiry that the market regulator launched against a group company and themselves, a person familiar with the matter told Moneycontrol.
SEBI suspended the IPO of GoFirst, which was earlier known as GoAir, due to an enquiry that was pending against Bombay Dyeing Manufacturing Company and the Wadias.
The person, a high-ranking executive at the airline, said he and his team have responded to all the questions for which SEBI wanted clarification. “I believe the period of abeyance is already over. The company has not got any notice for keeping in abeyance,” he said, asking not to be named.
In June this year, Bombay Dyeing and its promoters, the Wadias, were issued a show-cause notice from the SEBI's Corporation Finance Investigation Department (CFID) for alleged financial irregularities.
What SEBI rules say
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In SEBI parlance, an issue of observations implies go-ahead for the IPO. Normally, SEBI gives its observations on IPO papers in 30 days.
In cases where SEBI feels there is a possible cause for investigation or investigation is already in progress but no show-cause notice has been issued, SEBI can keep the matter in abeyance for 30 days. This can be extended by further 30 days or until the conclusion of the investigation.
In cases where a show-cause notice has been issued, SEBI can keep the process in abeyance for 90 days and by further 45 days or till the conclusion of the proceedings.
GoFirst is looking to use Rs 2,200 crore of the IPO to reduce its debt and repay lessors. The remaining Rs 1,600 will be used to increase the airline's route operations in India and internationally.
IPO just in time
Air travel in India took a severe hit due to the pandemic but is now limping back to normalcy. GoFirst is looking to expand operations to destinations such as Indonesia, Malaysia, Singapore, Sri Lanka, and Nepal to start operations once international travel opens up, the person cited above said.
The airline sees domestic passenger traffic returning to around 80 percent of pre-COVID levels by October in the absence of a third wave of COVID-19. Like other airlines, GoFirst is also betting on rising demand for leisure travel during the festival season and the New Year.
Ahead of the launch of the IPO. GoFirst said it will operate as an Ultra Low Cost Carrier (ULCC). Around 20 percent of the people who travel on GoFirst will get the benefit of cheaper fares because they would not want to pay for any amenities offered in the aircraft, according to the company executive cited above.
GoAir has also renegotiated its payment cycles with most of its aircraft lessors to two-three years. The airline is also in talks with lessors looking to set up shop in the Gujarat International Finance Tec-City in Ahemdabad and lease airplanes in India.It will also convert two airplanes from its current fleet to focus on cargo operations.