IndiGo's board approves creation of a financial services arm at GIFT City

Indigo

The board of InterGlobe Aviation Ltd, which operates India’s largest airline IndiGo, on September 4, approved the creation of financial services arms with an initial investment of Rs 30 crore.

The company in a filing to the exchanges outlined that the Board of Directors has approved the incorporation of a Private Limited Company with an initial investment of Rs 30 crore.

The airline's board has approved the investment which will be setup in the Special Economic Zone at Gujarat International Finance Tec-City, the airline said in an exchange filing with the stock exchanges.

Furthermore, the airline's board has also approved issuing corporate guarantees worth up to $996 million to secure the payment obligations of the aforesaid wholly-owned subsidiary.

While the airline did not specify the name of the new arm or its exact function, the airline mentioned that the subsidiary would be involved in the financing of aviation assets.

IndiGo's announcement comes just a few days after Air India became the first major airline to set up a leasing unit at IFSC Gift City in Gujarat.

Last year the government exempted aircraft leasing companies from paying corporate and withholding tax on leasing transactions in a bid to promote aircraft leasing from GIFT City.

The exemptions are part of the government’s efforts to transform the country into a global aircraft leasing hub to rival centres such as Dublin or Singapore by incentivising foreign lessors to commence operations from GIFT City.

Currently, the lion’s share of global aircraft leasing is done through Ireland and China. India hopes to get a piece of it through IFSC. In Feb 2021, the International Financial Services Centre Authority (IFSCA) issued a framework for aircraft leasing in India.

Taking learnings from Dublin, IFSC Gift City provides several incentives including tax benefits for 10 years from business profits, no capital gain tax, no stamp duty, and no GST on transactions carried out through the entity among others. The government has been trying to get aviation players to set up shop at Gift City for the past two and half years.

Gaurav Negi, the airline's chief financial officer, had announced the creation of a venture capital arm of IndiGo while addressing a post-earnings conference call on August 2.

Negi had on August 2 said that IndiGo has applied for regulatory approval to start a venture capital arm of IndiGo to invest in travel-related businesses.

"We are looking to start a venture capital firm for investments into startups operating in aviation, consumer and allied sectors such as travel & lifestyle, hospitality, and transportation," Negi said.

He added that the venture capital firm will have an initial fund of Rs 7 crore.

As of 30 June, India’s largest airline had free cash amounting to Rs 15,691 crore, up 89 percent from the previous quarter.