India’s GoAir Revives Public Offering Plans

Indian budget carrier GoAir is once again making plans for an Initial Public Offering (IPO). The airline is hoping to leverage the current state of the market to raise funds and manage its rising debt levels. The carrier plans to raise up to ₹3,000 crores ($412 million) from the public offering, if it happens.

GoAir A320 engine Getty
GoAir has teased the idea of an IPO several times since 2017, most recently in 2019. Photo: Getty Images

Now’s the time

According to ET Now, GoAir has begun taking the first steps towards a potential IPO in the coming months. The carrier has appointed Citi, ICICI Securities, and Morgan Stanley as bankers for the potential offering. GoAir is owned by the Indian conglomerate Wadia Group, which would see 30% of its stake go to the public in the IPO.

There are a few reasons the airline is looking to the financial markets in this uncertain time for aviation. The first is growing levels of debt GoAir finds itself in. Despite its previous streak of profitability, 2020 forced the carrier to ground flights and its expenses ballooned. The infusion of cash from an IPO might be critical to keep the airline afloat in the long-term.

GoAir A320neo
GoAir has had a particularly difficult 2020, racking up high levels of debt. Photo: Airbus

Explaining the IPO call, one official from the Wadia Group said, “We are looking at raising long-term funds and reducing debt. We have been told that given the current market sentiment, it is the right time to raise resources.”

Thr market sentiment for airlines has been bullish in the last few months, buoyed by falling infection rates and the vaccine rollout in India. Both IndiGo and SpiceJet have seen their shares rise by 80% and 90% respectively in the last six months. Considering this market, GoAir could be feeling confident that it has a chance to increase its value.

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Why GoAir?

You may be forgiven for not knowing too much about India’s third-largest budget airline. GoAir operates an all-Airbus A320 fleet of 55 aircraft and flies to 32 destinations (28 domestic and four international). The airline has been growing its fleet quickly in the last few years, hoping to add new, profitable routes to its network.

What’s notable about the airline is its financial figures. Despite not having the highest revenues, it has been able to almost consistently turn a profit. This is exceptional considering India is one of the most price-sensitive and high-cost markets globally, making profits a rarity among major airlines.

GoAir Airbus A320
GoAir’s profitability makes it an exception among Indian airlines and could make its IPO favorable to investors, provided it can prove a return to profits soon. Photo: Anna Zvereva via Wikimedia Commons

But this was all in the past. The last year has shaken the aviation industry and all previous bets are off. With a lower market share, GoAir might struggle as air traffic steadily recovers to pre-pandemic levels. For a successful IPO, the airline will have to prove that it has a path to return to profitability and soon.

It should be noted that this isn’t the first time GoAir has discussed an IPO. The topic has been mooted several times since 2017, yet the airline has pulled back. However, this year’s discussions could yield more favorable results.

What do you think about GoAir’s IPO plans? Will the offering go ahead? Let us know in the comments!