IndiGo seen funding mega aircraft purchase via IPO

Domestic carrier IndiGo Airlines’ ambitious plan to add 180 Airbus A320 aircraft is expected to cost it a whopping $15 billion, or Rs67,650 crore.

Analysts and industry experts are certain the company will raise equity capital for funding this expansion.

Some, in fact, see an initial public offer (IPO) during 2011.

“They will have to look at raising equity capital, which I believe is expected to happen within this calendar year,” said Nikhil Vora, aviation analyst, IDFC SSKI securities.

Another analyst from a domestic brokerage said, “The announcement on capacity expansion in fact needs to be seen as one of the steps towards creating the right kind of environment for the planned IPO.”

IndiGo would be eligible to start international operations from August-September. The company is expected to focus on the South Asia market to start with.    

IndiGo seen funding mega aircraft purchase via IPO

“Most likely they will announce their IPO after they start their international operations,” said an analyst from a domestic brokerage firm, requesting he not be named.

Most of the analysts believe that since the planned fleet expansion will happen over a long period of time, the company will be able to consider various fundraising options once the IPO is done.

But company officials insist there is no immediate requirement for an IPO.

“Expectations of IndiGo opting for an IPO have been around for a long time now. There is nothing that we may need an IPO for,” said Aditya Ghosh, president, Indigo Airlines.

Asked about the funding plans, he said, “We have around six years’ time to think about it. Aircraft financing happens as we near the date of delivery.”

The airline plans to take delivery of the 180 Airbus A320 aircraft between 2016 and 2025.

Among other financing options, IndiGo can resort to sale and leaseback of aircraft. “It is a form of financing which most airlines do. We also do some amount of it already. We have a mix of operating lease and financing lease, which will continue to be,” Ghosh said.