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Low-cost-carrier IndiGo is mulling raising funds to the tune of ₹3,000-4,000 crore from banks.
According to sources, the Gurgaon-based airline is speaking to multiple banks for short and medium-term loans. This comes even as it seems to have put its plan to raise funds via qualified institutional placement (QIP) on hold. Earlier this fiscal, IndiGo had taken approvals from its board to raise up to ₹3,000 crore via QIP before August 31.
However, BusinessLine had reported that because of the geopolitical issues surrounding the Covid-19 pandemic and its impact on the aviation sector, IndiGo found it difficult to find an investor.
Also see: Domestic air traffic grew more than 20% in Jan-Sept
Qualified institutional placement (QIP) is a capital-raising tool, primarily used in India and other parts of South Asia, whereby a listed company can issue equity shares, fully and partly convertible debentures, or any securities other than warrants which are convertible to equity shares to a qualified institutional buyer (QIB).
Rising air travel demand
Domestic and international travel has picked up in recent times. In its Q2 FY22 results on Thursday, Indigo announced that it has over ₹6,351 crore free cash on its books. Another source said IndiGo is in a better position because it has a fuel-efficient fleet, better assets, and free cash on books.
In the earnings call, Jiten Chopra, CFO, IndiGo, said, “Due to the improved revenue environment, our average cash burn per day reduced by around 39 per cent in the September quarter. Further, we ended the quarter with a free cash of 63.5 billion rupees, a net increase of 7.3 billion rupees as compared to June end.”
Also see: IndiGo clocks net loss of ₹1,436 crore in Q2
“In order to conserve that cash, and tide through the lull period, IndiGo has activated its plan ‘B’ and approached Indian banks. It has so far knocked on the doors of Kotak, Bank of Baroda, and Deutsche Bank, among others. It plans to raise short- term to medium-term loans to the tune of ₹3,000-₹4,000 crore,” a source added.
IndiGo did not respond to BusinessLine’s query and we could not get a confirmation from the banks immediately. The airline on Thursday posted its seventh straight quarterly loss of ₹1,435.7 crore in July-September 2021 quarter, widening from a loss of ₹1,195 crore in the same period last year.
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