Indigo Airlines is to have an IPO. The InterGlobe Aviation Ltd that operates Indigo Airlines Ltd has filed its Draft Red Herring with the market regulator. The company will issue about 10 pc fresh equity capital and existing shareholders will sell about 15 pc of their equity shares. Considering Sebi’s conditionality of 25 pc minimum public offer, the IPO size will be Rs 3,180 crore. Monies to the tune of Rs 1,272 crore raised through issue of fresh capital will go towards meeting IPO cost, payments for outstanding lease payments, aircraft acquisition and purchase of ground equipment. Money raised through equity sale of existing shareholders to the tune of Rs 1,908 crore will not come to the company.
The financials of Indigo Airlines raises many questions. In 2006, Rahul Bhatia who ran a travel agency and sold IT software for the airline industry started the Indigo operations. In the same year he was joined by Rakesh Gangwal who came from the world of technology & information services of the aviation industry. The Bhatias & the Gangwals are the two main promoter families of the company, with each owning 47 pc of the company.
In 2006, the company had just a single aircraft, as of April 30, 2015, it has a fleet of 96 aircrafts, all of which are Airbus 320. It became the UPA regime’s fastest growing company with a cache of operating & finance leases. It had placed an order for 100 aircrafts on Airbus in 2005, a year ahead of its operations. So what were the back-up guarantees to the lenders and lessors considering that all the shareholders put together had made a total investment of just Rs 61 crore only?
Even more curious is the dividend payout dimension of the company. The company paid out a dividend of Rs 3,499 crore during 2011 to 2016 with the Gangwals & Bhatias each receiving Rs 1,645 crore. The amount is staggering when one considers that for the Bhatia’s the average cost of acquisition worked out to be Rs 2.40 per equity share of Rs 10. For Gangwals, it worked out to be Rs 6.59 per equity share of Rs 10.
Then there is one Tariq Taher Carrimjee, who was issued 4,034 convertible preference shares (CPS) of the company, and his name appears on the International Consortium of Investigative Journalists (ICJJ) website. These are questions that must be answered by the company.
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