GoAir gets initial share sale nod from India’s market regulator

Go Airlines India Ltd. has got the green light from the nation’s market regulator to raise 36 billion rupees ($485 million) through an initial public offering, according to a person familiar with the matter.

GoAir’s share sale was put on hold in June by the Securities and Exchange Board of India. The airline now expects to file a preliminary prospectus in about three weeks, the person said, asking not to be identified because the information isn’t public. Local media reported the approval from Sebi earlier Friday.

A GoAir spokesman and representative from Sebi didn’t immediately respond to requests for comment.

A share sale would come at an opportune time for debt-laden GoAir, which is losing money and plans to rely on proceeds from the IPO to repay debt and dues to creditors including Indian Oil Corp. The carrier, in the process of rebranding itself as GoFirst, has obligations that totaled around 81.6 billion rupees as of mid-April, according to its draft preliminary prospectus.

While Sebi hadn’t specified its reason for delaying the IPO in June, the person familiar said it was paused because of an ongoing investigation that began in 2019 into a company called Bombay Dyeing & Manufacturing Co., which is owned by GoAir’s parent Wadia Group. Sebi was investigating Bombay Dyeing over certain financial disclosures, BloombergQuint reported in June.

Mumbai-based GoAir has long marketed itself as a budget airline, but its expenses are higher than competitors including InterGlobe Aviation Ltd., known as IndiGo, and SpiceJet Ltd., an analysis by Bangalore-based wealth manager Capitalmind in May showed.

Zero-Baggage Fares

Regardless, GoAir is trying to reposition itself as an ultra-low cost carrier to become more competitive in the country’s cutthroat air travel market. 

One way to do that will be by unbundling baggage charges from air tickets, the person said. India’s Directorate General of Civil Aviation in February ruled that carriers can start offering zero baggage and no check-in baggage fares.

GoAir’s move to make ticket prices even cheaper will intensify competition among carriers known for driving fares so low they barely cover costs. Those bruising price wars have already put many airlines out of business in what was one of the world’s fastest-growing aviation markets before the pandemic. 

Kingfisher Airlines Ltd., once the country’s second-largest domestic carrier, ended operations in 2012, and Jet Airways India Ltd., which was recently approved to fly again, collapsed in 2019.

GoAir has deferred rental payments to lessors for two to three years due to the pandemic, the person said. The carrier is Airbus SE’s second-biggest customer—of the 144 Airbus A320 neo aircraft GoAir has on order, it’s awaiting delivery of 98 jets and is in the process of renegotiating with the planemaker regarding those deliveries, its draft preliminary prospectus showed. 

GoAir started flying in late 2005. Prior to Covid, its network spanned 28 locations across India and nine international ones including Dubai, Singapore and Phuket.