Sebi keeps approval to Go Air’s IPO in abeyance

The Securities and Exchange Board of India (Sebi) has kept the approval of Go Airlines (India)’s ~3,600-crore initial public offering (IPO) in abeyance.

While the airline denied receiving any communication from the stock market regulator, Sebi’s website shows that it had sought clarifications from ICICI Securities, the lead banker for the pre-issue, on June 11. The issuance of observations on the airline’s draft red herring prospectus has been kept in abeyance, it said.

The Wadia-group owned airline was rebranded as Go First, positioning itself as an ultra-low-cost airline and filed papers last month to raise ~3,600 crore through a share sale. It plans to use the proceeds to meet its debt obligations, pay oil companies, replace letters of credit given to aircraft lessors towards lease rent, and future maintenance of aircraft.

Issuance of observations by Sebi implies approval for a public offering. As the market regulator, it is Sebi’s job to vet documents submitted by companies before giving them the go-ahead for an IPO. It is a common practice for the regulator to raise queries to investment banks on an offer document.

Market experts said, typically, an IPO issue is kept in abeyance when the violation is serious in nature. They said it could take a company more than a month to address the issue before the regulator begins the vetting process afresh.

In this case the exact observations issued by Sebi could not be ascertained, but the regulatory action could delay the airline’s fundraising plans.

According to documents filed with Sebi, the Wadia family and their company Go Investment hold 100 per cent stake in the airline. At least 22.56 per cent of Go Investment is pledged with a lender’s consortium. In the nine month ending December 2020, the airline posted a loss of ~470 crore on total income of ~1,438 crore. The airline posted a loss of ~1,270 crore in FY20 on an income of ~7,258 crore, according to consolidated financial statements that were part of the IPO filing.

While negotiations with lessors were highlighted as risk factors in the prospectus, the airline has been able to negotiate a longer repayment schedule for one of its loans with the French lender BNP Paribas.

It has also received positive feelers from lessors for further deferment of lease payment on account of the second wave of the pandemic.