India: IndiGo may shelve fundraising plan if travel picks up

An IndiGo Airlines A320 aircraft is parked on the tarmac at Rajiv Gandhi International Airport in Hyderabad March 7, 2012. REUTERS/Vivek Prakash

IndiGo, India’s largest domestic airline, may shelve a planned share sale to raise 4,000 crore as it is hopeful that an increase in ticket sales in the coming months will negate the need to bolster its cash reserves.

This is despite predictions that the country’s civil aviation market will suffer a big blow this fiscal from the effects of the coronavirus pandemic that saw one of the world’s strictest lockdowns and a two-month suspension of domestic air travel.

The board of InterGlobe Aviation Ltd had on 10 August approved raising funds through Qualified Institutional Placement (QIP).

However, addressing shareholders at the airline’s 17th annual general meeting on Friday, IndiGo’s chief executive Ronojoy Dutta said there is currently a 50% chance of the QIP taking place.

IndiGo’s chief operating officer Wolfgang Prock-Schauer said on Thursday that the carrier is betting big on the festive season for a revival in demand as it is seeing an increase in flight bookings in line with the easing of travel restrictions.

The airline is using about a third of its capacity on local routes, which it expects to increase to as much as 60% by Diwali, Prock-Schauer said.

He said IndiGo is now filling about 70% of its aircraft seats, up from 55% earlier, though fliers wary of frequent changes in travel curbs by states are opting for short-term bookings.

According to consultant Capa India, the immediate impact on the aviation market is due to health worries and travel curbs, and that “the full force of the economic downturn and supply-side risks may only become apparent in FY2022″.

“Excluding IndiGo, the cash position of the industry as on 31March 2020 was just $200 million (IndiGo had $1.36 billion),” Capa said in a 21 August report.

Credit rating agency Icra has predicted a 41-46% decline in domestic passenger traffic this fiscal, though the second half will witness some recovery with the decline narrowing to 3-14% in the March quarter.

IndiGo’s shareholder meeting was held virtually due to the pandemic.

The promoters are involved in a feud that is currently under arbitration before the London Court of International Arbitration.

At the AGM, CEO Dutta said the airline has managed to reduce its daily cash burn to 30 crore this quarter from 40 crore in the June quarter.

He also said that the airline is currently utilizing about 35% of its fleet due to the various travel curbs imposed by states.

“We are aggressively adding capacity and hope to take that utilization number up as fast as we can,” he added.

IndiGo posted a record net loss in the June quarter of 2,844.3 crore.

The airline had a total cash balance of 18,449.8 crore, comprising 7,527.6 crore of free cash and 10,922.2 crore of restricted cash as of June-end.

This article was first published on livemint.com.

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.