GoAir IPO Halted Amid Ongoing Investigations

In a blow to GoAir’s public offering plans, financial regulator SEBI has halted the IPO process for 90 days. The delay comes as the regulator investigates irregularities with GoAir owner Wadia Group’s other holdings. Under the rules, an IPO is automatically halted when related companies are under investigation.

GoAir A320
GoAir was hoping to go public by August and raise funds to weather the COVID-19 crisis. Photo: Airbus

Paused

According to Moneycontrol, GoAir’s IPO has been paused for 90 days by stock market regulator SEBI. GoAir is 96.85% owned by Indian conglomerate Wadia Group. This means the carrier is one of many ‘related companies,’ and subject to further scrutiny vis-a-vis the group’s other holdings.

Earlier this month, Wadia Group-owned Bombay Dyeing received a notice from the Corporation Finance Investigation Department. The notice triggered an automatic 90-day pause on GoAir’s IPO plans, and could result in another 45-day extension if the matter is not resolved.

GoAir A320neo
Financial investigations with GoAir’s owners could derail the airline’s long-planned IPO plans. Photo: Airbus

GoAir reportedly appealed to SEBI to give the carrier an exemption from the rule. However, the request did not receive a response and the pause has gone into effect. This means SEBI will not approve GoAir’s draft prospectus which was submitted in early May.

In a statement to Simple Flying, a GoAir spokesperson said,

GoAir has received no communication from SEBI.”

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Timeline

With a 90-day paused now in effect, and the possibility of 45 days more, GoAir’s original IPO timeline is in trouble. The carrier originally hoped to receive SEBI clearance in late July and make its public listing in August. However, the pause means that no plan will be approved before September at the earliest.

IndiGo GoAir A320s
While the pandemic has exacerbated issues, GoAir has been struggling for years. Photo: Getty Images

Meanwhile, we also have more details about GoAir’s financial situation during the pandemic. The carrier’s operational cash flow in the first nine months of fiscal year 2021 (April-December 2021) reportedly fell to ₹232 crores ($31.2mn). This represented a massive 86.8% fall from the same time in 2019, where cash flow stood at ₹1,738 crores ($234mn).

Woes

However, GoAir’s financial woes have not arisen during the pandemic alone. The carrier reportedly made a loss for the last four financial years, signaling underlying issues. The pandemic caused all of these problems to come to a head, with GoAir’s debt surging to ₹7,346 crores ($989.1mn) at the end of last year.

GoAir A320 engine Getty
GoAir’s net worth currently stands at negative ₹1,961 crores ($264mn). Photo: Getty Images

Indeed, the airline plans to use the ₹3,600 crores ($484.77mn) from the upcoming IPO to repay its growing debt pile and renegotiate credit agreements with aircraft lessors. GoAir already received a ₹800 crore ($107.7mn) emergency loan from the Indian government in March to repay debt obligations.

Now, with the IPO’s new timeline up in the air, GoAir will need to prepare to survive the pandemic without a boost of cash. With the second wave now receding, there could be some good news on that front.

Recovery

The last month has seen domestic traffic bounce back in India. Passenger traffic has nearly tripled since mid-May, indicating that a sustained recovery is underway. If all goes on track, GoAir could see its revenues rise once again and help cover obligations until its IPO is back on track.

What do you think about the future of GoAir’s IPO? Let us know in the comments!

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