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Capital Calls: Valuing GoAir’s IPO will be a turbulent exercise

2 minute read

FILE PHOTO: A GoAir Airbus A320neo passenger aircraft is parked at the Airbus factory in Blagnac near Toulouse, July 1, 2020. REUTERS/Benoit Tessier/File Photo

MUMBAI, May 17 (Reuters Breakingviews) - Concise insights on global finance.


UP IN THE AIR. Plans for an initial public offering by GoAir offer a cockpit view of Indian aviation misery. The ultra-low-cost carrier is looking to raise read more $491 million through a Mumbai listing, and a further potential $204 million through a pre-IPO placement of shares. It’s earmarked at least half of the proceeds to trim debt, replace letters of credit and repay unpaid bills to its fuel provider, the $13 billion state-backed Indian Oil (IOC.NS). There’s no other good reason to take an airline public at this time.

GoAir carried 16.2 million passengers in the full fiscal year before the pandemic, but only 15% of that figure in the subsequent nine months. If it prices at the same trailing 18 times EBITDA multiple of Interglobe Aviation (INGL.NS), the owner of top rival Indigo, GoAir’s enterprise might be worth $841 million based on its pre-pandemic performance in the year to March 2020 – even though its profit margins collapsed that year. Applying the same multiple to the prior year’s performance yields a valuation over $2 billion. Valuing an airline during India’s fresh lockdowns will be a turbulent exercise. (By Una Galani).

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