The board of directors of InterGlobe Aviation Limited, which operates the country’s largest airline IndiGo, following deliberations decided that the airline will continue to explore all options to increase its liquidity, including by way of a Qualified Institutional Placement (QIP).
The airline said this in disclosures to the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The board of directors of InterGlobe Aviation Limited met on Friday, May 7 to deliberate raising funds through a QIP.
IndiGo had earlier in January shelved plans to raise funds up to ₹4,000 crore through a qualified institutional placement (QIP), opting instead to raise money through sale and lease back (SLB) transactions and other alternative options.
QIPs are a means of issuing shares to the public without going through standard regulatory compliance, while SLB is a transaction in which the owner sells the aircraft, and then takes it back on lease from the buyer. Such a deal typically removes the aircraft, and its associated debt, from the carrier’s balance sheet.
IndiGo, Among the Fastest Growing
InterGlobe Aviation (IndiGo) is amongst the fastest growing low cost carriers in the world. It had a fleet of 287 aircraft as of December 31, 2020.
The decision by IndiGo’s board of directors comes at a time when airlines are struggling with a declining passenger demand due to an unabated rise in fresh COVID cases across the country.
Fewer Indians took to the skies for the sixth week in a row for the week to May 1.
The average number of daily fliers stood at 126,000 for the week ended 1 May, down from 152,000 for the week earli, and less than 193,000 in the week ended 17 April, according to a report by ICICI Securities.
Meanwhile, the second wave of infections, which has brought the country’s healthcare system to its knees, could precipitate a collapse of the domestic aviation sector, aviation consultancy firm CAPA India said in a report on Monday.
IndiGo will be the only carrier to emerge from the crisis significantly stronger because of its very strong balance sheet, the report said.
A Business Standard report said that IndiGo, India’s largest airline, is in talks to raise fresh funds as a second wave of pandemic has led to collapse in travel demand. The airline may look to raise Rs. 3,500-4,000 crore. On Monday, only 97,761 passengers flew.
With flyers cancelling bookings, airlines had to put aside flights and operated only 1,306 of them. Both the numbers are the lowest since August 28, when traffic had crossed 100,000 since air transport had reopened on May 25 after a two-month lockdown.
Qatar group chief executive officer Akbar Al Baker told Mint recently that his airline saw India as a strategic market and it had rekindled its interest to pick up a stake in India’s largest domestic airline, IndiGo.
Qatar airways had in 2019 after entering a code share agreement with IndiGo, said that it is interested to pick up a stake in the airline. “We are very keen to take a stake in IndiGo but I don’t think this is the right time,” Akbar Al Baker had said at that time.
Previous discussions did not lead to fruition, with Mr. Al Baker saying then, “I don’t think this is the right time.”
It’s clear that Qatar sees a dual benefit from buying a stake in IndiGo. One would be access to IndiGo’s expansive route map of 67 domestic routes.
While Qatar already flies to 13 destinations across the country, it has long been trying to increase services in India. A deal with IndiGo would open the door to carrying hundreds of thousands of more passengers every year through the largest route network.
The second benefit would be through IndiGo’s value itself. The low-cost giant operates a fleet of over 250 planes and dominates the Indian market.
While the carrier has been struggling with losses for the last year, it has a long run of turning a profit in the past. Unlike other foreign airline investments, IndiGo is a strong bet to prove lucrative in the long run as well.