When the pandemic hit the global aviation industry, several airlines were bailed out by their governments. In India, with no bailout in sight, some budget airlines have been flying on a wing a prayer. And just when it seemed like they’ll somehow get by, the second covid wave has threatened the survival of mid-sized airlines all over again.
Go Airlines (India) Ltd, which runs the low-cost airline Go First, has come up with a bold solution to escape this predicament. The company plans to make an initial public offering (IPO) of its shares worth ₹3,600 crore.
“If the company is successful in raising as much as ₹3,600 crore, it will go a long way in stabilizing its operations,” said an analyst at a domestic institutional brokerage requesting anonymity. The situation is now so bad that the company has said a part of the IPO proceeds will be used to repay dues to Indian Oil Corp. Ltd for fuel supplies.
A moot question is what valuations the company can expect and how much equity it would be willing to dilute in the IPO. In the past month, the company raised ₹546 crore from its promoters at a post-money equity valuation of merely ₹2,600 crore.
If the IPO is at similar valuations, this will result in huge dilution and the promoter stake will fall to below 42% from nearly 100% pre-IPO.