Wednesday, July 18, 2012

GoAir aims to raise Rs 1,100 crore to pare debt

MUMBAI: Wadia Group-promoted budget airline GoAir is in the market to raise $200 million (Rs 1,100 crore) in equity to pare debt, a source close to the development said.

The airline, which was eyeing to rope in a strategic investor to offload stake, is now willing to cut a structured equity deal with private equity players with fixed return on investments, the same source added.

"GoAir wants to retire a portion of its debt and is willing to offer some of the group's real estate assets as collateral to raise $200 million," the person said. GoAir, according to information filed with the registrar of companies for 2010-11, had debt of over Rs 600 crore.

The airline has inched up its market share as Vijay Mallya-promoted Kingfisher Airlines slumped to the sixth slot in terms of market share due to its financial troubles. Its ambition can be gauged from the fact that it has sought waiver to a government rule that allows domestic carriers to fly international only if it has 20 aircraft in its fleet.

GoAir currently has about 12 aircraft in its fleet and has said that it wants to start operations to destinations between three to four hours of flying soon as these operations will allow optimum utilisation of its aircraft.

The airline clarified that it's not in the market for an equity infusion. GoAir Managing Director Jeh Wadia, however, said that the airline is well capitalised and is not actively looking for funds. He also said that GoAir has met initial payment commitment for 72 Airbus aircraft it ordered in June 2011.

The budget airline that has over 200 flights per day has placed an order for 72 A- 320 neos, said to be more fuel efficient than the existing 320s. The value of the order alone is about $7.2 billion (list price) and the deliveries will start from 2016. Responding to ET's queries, GoAir said: "As a company we don't comment on market speculation. We would like to mention that we are a fully and adequately funded company. We have fully funded the acquisition of our balance 72 aircraft on order from Airbus. We have not specifically given any mandate to anyone at present for any fund raising as we are fully funded."

However, ever since it placed the order with Airbus, the airline has been getting enquiries from prospective investors.

Also, in what could be a prelude to a fund raising, GoAir, in a recent filing of outcome of an extraordinary general meeting held on May 2012 in its Worli office to regulatory authority, informed of reclassification and increase of authorised share capital and said it has increased the authorised share capital from 150 crore to 170 crore which is also indicative that the company intends to raise equity in near term. GoAir also stated that it will diversify its businesses from the current one of being in commercial scheduled and non-scheduled aircraft operations business and explore new businesses opportunities. GoAir had at one point approached the market for raising funds but could not strike a deal with private equity players as the deal fell apart on valuation issues.

Contrary to market sentiment, a private equity player believes the timing is right for GoAir to hit the fund-raising trail as oil prices have eased a bit and valuation might be favorable for promoters.

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