IndiGo to Raise $409 Million in Strategy Reversal on Virus Surge
(Bloomberg) -- IndiGo, one of Asia’s biggest budget airlines, plans to raise 30 billion rupees ($409 million) by selling shares as a worsening spike in Covid-19 infections in India puts any domestic or international air travel recovery on hold.
IndiGo, operated by InterGlobe Aviation Ltd., approved a proposal to raise funds selling shares to large investors, the airline said in an exchange filing Monday. The move comes a few months after it said it didn’t need money.
In January, IndiGo shelved plans to raise as much as 40 billion rupees with then Chief Financial Officer Aditya Pande saying the company’s internal sources of cash would be sufficient on the back of a recovery in demand. That was before a vicious second wave of virus cases erupted in Ind, killing thousands of people. Pande resigned in February and has been replaced by Jiten Chopra.
India’s rapidly rising Covid-19 caseload has disappointed the country’s air travel industry, which had just begun to show signs of recovery, particularly in domestic routes. Airlines in the South Asian nation lost $2 billion in nine months last year. The second wave has delayed a recovery by around six months for international travel and three for domestic, according to India Ratings & Research Ltd., a unit of Fitch Ratings Ltd.
Moody’s Investors Service said last month that any revenue decline due to a fall in traffic will damp the already weak financial numbers for airports too, including Delhi International Airport Ltd. and GMR Hyderabad International Airport Ltd.
IndiGo is burning about 150 million rupees of cash every day, Pande said on an earnings call in January. SpiceJet Ltd., India’s second-largest carrier, has deferred salaries for half of its employees, while Chairman Ajay Singh will forgo his salary entirely. The government in India has currently restricted airlines to operate at 80% capacity.
The malaise has also seen aircraft manufacturers Boeing Co. and Airbus SE reset production targets as demand for new planes vanishes. IndiGo is the biggest customer of Airbus’s best-selling A320neo jets.
IndiGo posted a wider-than-expected net loss of 6.3 billion rupees in January for the three months ended Dec. 31, compared with a record deficit of 12 billion rupees in the second quarter. Revenue for the period slumped 51% year-on-year, while total cash stood at 183.7 billion rupees.
At the time, CEO Ronojoy Dutta said IndiGo was looking forward to a “gradual opening up of international scheduled flights because increased capacity and aircraft utilization are so very critical for our return to profitability.”
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