NEW DELHI: With its IPO possibly delayed by a few months, struggling airline GoAir may have to look at alternative routes to raise funds. The airline’s net balance was almost negligible as of April 2021 and it had a debt of Rs 2,956 crore. “This could make things difficult as it was relying heavily on the IPO proceedings to service its borrowings,” said an aviation sector analyst, requesting anonymity.
He added that like other airlines, GoAir was gasping for funds to survive the pandemic. “While IndiGo, despite being cash rich, is raising Rs 3,000 crore as part of a qualified institutional placement and SpiceJet is having a board meeting on Wednesday to discuss fundraising plans, GoAir will have to find other ways as time is running out,” he said.
When asked about the options available for the Mumbai-based carrier to raise fresh capital, he noted that raising fresh loans can be difficult as banks are cutting exposure to this sector. “However, it is not impossible since promoter Wadia Group has reputed businesses. The airline can also seek funds from its promoters, make an inter-corporate deposit, or get external investors. There are many ways a private company can raise money,” he pointed out.
In a major setback, market regulator SEBI halted GoAir’s IPO process by up to 90 days on Monday. The notification did not specify any reason for the temporary hold; but only showed that GoAir’s IPO application submitted has been “kept in abeyance”. According to reports, the delay has been caused by the regulator’s investigations into irregularities related Bombay Dyeing, another company owned by the Wadia Group. Share prices of Bombay Dyeing and Manufacturing Company fell over 4 per cent on Tuesday to Rs 87.15.
GoAir, which recently branded itself as “Go First” had filed papers for an initial share sale worth Rs 3,600 crore in May. The proceeds will be mainly used by the airline to pay debt, about Rs 2,956 crore as on April 19, 2021. It also intends to repay dues of Rs 254.93 crore to Indian Oil Corporation for fuel supplied.
According to its draft red herring prospectus (DRHP), GoAir has been a loss-making company for quite sometime. It has a negative net worth of Rs 1,962 crore and at the end of December 2020, the company had a miniscule cash balance of just Rs 11.6 crore. ICRA estimates that Indian airlines will incur collective net losses of about Rs 21,000 crore in FY22 and require Rs 37,000 crore extra funding in FY23.