Wadia Group asserts no impact on finances from Go First bankruptcy

Go First insolvency: “Wadia Group was not approached by any lenders globally or domestically for any potential bid for GoFirst, '' the spokesperson said responding to a detailed questionnaire.

The Nusli Wadia-led Wadia Group has asserted that the bankruptcy of its budget airline Go First in May last year will not hinder its capacity to raise funds for other businesses within the group in the future. A spokesperson for the group responded to a query from Moneycontrol, saying, "The credit ratings of all Wadia Group companies are robust."

“All companies belonging to the Wadia Group are well funded for all future growth plans,” the spokesperson said without providing additional details. GoFirst, established in 2005, filed for voluntary bankruptcy in May last year. The airline has outstanding debts amounting to more than Rs 6,521 crore, primarily owed to lenders, with a significant portion from public sector banks.

Following Go First's bankruptcy filing, there were reports suggesting that the Wadia Group might submit a bid for the airline, potentially with the involvement of a global fund. However, in the end, the Wadia Group did not proceed with such a bid.

Under certain conditions regulations allow promoters of bankrupt companies to also bid for the company via a competitive process. Bankruptcy resolution process usually involves significant haircuts for creditors which in turn lowers the debt burden on the company and improves its chances of revival of the company.

“Wadia Group was not approached by any lenders globally or domestically for any potential bid for GoFirst, '' the spokesperson said responding to a detailed questionnaire.

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Deborshi Chaki

Senior Editor – Corporate

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Although there are currently no regulatory restrictions on domestic banks lending to other group entities, senior bankers requesting anonymity said that such transactions are difficult to execute given the enhanced credit risks at the group level.

“It is really tragic that despite significant fund infusion from the promoters (to the tune of Rs 3,200 crore in the last 3 years) and full support from the government and the banks, the airline operations could not be sustained because of Pratt and Whitney’s (P&W’s) faulty engines, and them not meeting their legal and moral contractual obligations to repair failed engines,” the spokesperson added.

Also read: SpiceJet's bid for Go First: Can the ailing revive the dead?

CRISIL Ratings has in December upgraded the credit rating of group flagship Bombay Dyeing and Manufacturing Company Limited (BDAMCL) to stable, taking into account the strong market position in the polyester staple fibre (PSF) segment, healthy track record of booking progress in existing real estate projects and the strong financial risk profile.

In May last year, however, CARE Ratings had flagged concerns over Bombay Dyeing’s ability to service its debt during FY 2024 and 2025, given the tightly matched cash flows and refinancing risks.  The company was, however, able to sell a 22-acre prime land parcel in Mumbai’s Worli to raise over Rs 5,000 crore to potentially meet its debt obligations maturing in FY 24 and 25. In September, India Ratings and Research (Ind-Ra) downgraded another group company, The Bombay Burmah Trading Corporation Limited’s (BBTCL) long-term issuer rating to ‘A+’ from ‘AA’   with a negative outlook.

Also read: Wadia Group stays away from Go First insolvency process

Britannia Industries, the groups’ most profitable enterprise, remains on strong financial footing but has regularly dipped into its cash reserves to pay dividends to shareholders.

Despite flat revenues, Britannia declared an interim dividend of ₹72 per equity share in April for the financial year FY23, which was a 7,200 percent payout compared to the face value of Re 1 each for the company’s share in the last fiscal. The company paid a dividend of Rs 83 per share in August 2020, which is the highest in its history of going public. The promoters have in the past regularly raised funding from international lenders against the pledged shares of Britannia Industries to fund other businesses including GoFirst.