GoAir plans D-Street landing with Rs 3,600 crore IPO

Wadia Group-owned GoAir has filed the Draft Red Herring Prospectus (DRHP) for its IPO with market regulator SEBI. The move came just ahead of the airline deciding to rebrand itself as 'GoFirst' from 'GoAir'. The airline intends to raise Rs 3,600 crore through its proposed IPO.

A Draft Red Herring Prospectus is a preliminary registration document prior to a public offering. ICICI Securities, Citigroup, Morgan Stanley are bankers to GoAir's IPO.

According to sources, the company would be issuing 25-30 percent equity into the market via the fresh issue. Since there will not be any Offer For Sale (OFS) element in the issue, all funds raised would come into the company. As per the DRHP filed, GoAir intends to use Rs 2,015 crore or prepayment or scheduled repayment of all or a portion of outstanding borrowings. The airline also intends to use Rs 279 crore for replacement of letters of credit issued to certain aircraft lessors and Rs 254 crore is for repayment of dues to the Indian Oil Corporation.

Repayment and prepayment would substantially reduce the total borrowings of the airline which stands at Rs 2,955 crore.

If one looks at financials, total income for the airline stood at Rs 1,438 crore for the nine months ending December 2020. The airline has been incurring losses which stood at Rs 470 crore for nine months ending December 2020.

GoAir in its DRHP has mentioned that the airline has placed firm orders for 144 Airbus A320 NEO aircraft as part of its growth plan. Of these, they have taken delivery of 46 Airbus A320 NEO aircraft and awaiting delivery of 98 Airbus A320 NEO aircraft. The remaining aircraft are scheduled to be delivered from 2021 onwards, subject to any delivery advancements or deferrals to be negotiated with Airbus.

Talking about risks, the DRHP mentioned that the airline has and continues to be in payment default under several aircraft lease agreements. Such defaults may lead to lessors initiating legal or enforcement proceedings or enforce bank guarantees, appropriate security deposits or repossess aircraft, which will adversely affect the business, financial condition and results of operations.

GoAir has also defaulted under one of the loan agreements (in relation to which the airline has entered into an agreement to reschedule the principal repayments).

Four lessors have issued default notices to GoAir. These notices relate to 24 aircraft and the total amount claimed under these notices is $35.75 million.

The airline commenced operations in 2005 and has just over 50 aircraft in its fleet.