COVID-19 impact: IndiGo to raise Rs 3000 crore through QIP

The fundraising comes at a time when the aviation industry’s recovery has been delayed due to a second wave of the coronavirus pandemic.
Indigo flight on tarmac
Indigo flight on tarmac
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The Board of Directors of InterGlobe Aviation Limited, which is the holding company of private carrier IndiGo, has approved the raising of funds of up to Rs 3,000 crore through a Qualified Institutions Placement (QIP), the company said in a regulatory filing on Monday. 

“…the Board of Directors of InterGlobe Aviation Limited (the "Company"), at its meeting held today, i.e., May 10, 2021, has approved the raising of funds for an aggregate amount not exceeding INR 3,000 Crores (Indian Rupees Three Thousand Crores) through an issue of equity shares by way of a Qualified Institutions Placement,” the filing noted. 

A qualified institutional placement (QIP) is a way for listed companies to raise capital without having to submit legal paperwork to market regulators. SEBI introduced the QIP process in 2006, to avoid the dependence of listed companies in India on foreign capital resources.

IndiGo added that it is subject to the approval of the company's shareholders and receipt of applicable regulatory approvals. 

Earlier, the board of IndiGo had decided to continue exploring all options to increase its liquidity. In a regulatory filing, the company said that its board at its meeting held on May 7, deliberated the possibility of raising funds for the company through a QIP. 

In January, the airline had shelved plans to raise funds up to Rs 4,000 crore through a QIP and instead opted to raise money through sale and lease back (SLB) transactions and other alternative options.

The latest fundraiser comes at a time when the aviation industry’s recovery has been delayed due to the second wave of the coronavirus pandemic. According to India Ratings and Research (Ind-Ra), recovery in domestic and international travel has been delayed by three and six months respectively, due to the COVID-19 resurgence. 

The first two months of 2021 witnessed a solid improvement in air travel, after a steep decline in EBITDAR (earnings before interest, taxes, depreciation, amortisation & rent) losses in Q3 FY21 as airline operations normalised, it said.

However, late March and April have seen a sharp rise in active COVID-19 cases all across India which has significantly impacted air travel and dented confidence in aviation recovery.

Besides, 2021 has brought three new challenges such as higher fuel expenses as crude prices recover amid soaring global demand, rising competition intensity amid the possible restart of operations by Jet Airways, and likely pressure on airline yields as the scramble for market share realignment to the pre-COVID period begins, Ind-Ra noted. 

"Ind-Ra believes the domestic air travel recovery should resume in three months if the fresh COVID wave subsides. However, a meaningful international travel recovery is around six months away and contingent on the achievement of vaccination coverage for a significant proportion of the population," the rating agency said.

With IANS inputs

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