Launched in 2005 with an initial investment of $50-60 million, IndiGo is today India's most profitable airline. The low-cost carrier's (LCC) president Aditya Ghosh spoke to TOI as the airline comes out with its IPO of Rs 3,000 crore of which Rs 1,272 crore will be raised as fresh equity. Excerpts:
There has been talk of a negative net worth due to payment of hefty dividends.Has this affected the response to the IPO?
IndiGo had a negative net worth on a particular date, June 30, 2015. Even on that day, we had cash reserves of Rs 3,675 crore. The cash build up started afresh from July 1 and we are again net worth positive. The negative net worth of Rs 139 crore was equal to just 20 days of profit for us as the net profit in our April-June, 2015, quarter was Rs 640 crore. The response to our IPO is phenomenal as we are staring at massive growth prospects with the lowest-cost structure for any airline in India and the world.
There has been talk of a negative net worth due to payment of hefty dividends.Has this affected the response to the IPO?
IndiGo had a negative net worth on a particular date, June 30, 2015. Even on that day, we had cash reserves of Rs 3,675 crore. The cash build up started afresh from July 1 and we are again net worth positive. The negative net worth of Rs 139 crore was equal to just 20 days of profit for us as the net profit in our April-June, 2015, quarter was Rs 640 crore. The response to our IPO is phenomenal as we are staring at massive growth prospects with the lowest-cost structure for any airline in India and the world.
What makes you so bullish on air travel in India?
India is the most under-penetrated aviation market in the world. India had 130 commercial planes in 2005, a figure that has gone to just 391 today. We will soon have a middle class population of half a billion people. LCCs account for over 65% of air travel in India. IndiGo's market share has grown from 12.5% seven years back to 36.5% today. Every one in three domestic flyer here flies IndiGo. We are in a sweet spot. At present, India has 56 airports where a Boeing 737 or A-320 can operate. We go to 33 of them. As aircraft start arriving, we will go to the each of the other 23 places like Surat, Bhopal, Jodhpur and Jorhat apart from adding cities abroad too and adding frequencies on existing routes.
How have you managed to keep your costs low?
We do the sale-and-leaseback model for our aircraft.Each aircraft is taken on a short lease of six years and returned thereafter. We are a nine-year-old airline but the average age of our fleet is less than four years. So, a plane goes back before it gets old enough to start needing expense for repairs.
Qatar Airways boss Al Baker has for years shown interest in buying a stake in IndiGo.Why did you choose IPO route over FDI?
I thank Mr Baker for his kind words for IndiGo. We had no need for funding. We mainly chose the IPO route so that every three months, we are answerable to ourselves about our performance.
India is the most under-penetrated aviation market in the world. India had 130 commercial planes in 2005, a figure that has gone to just 391 today. We will soon have a middle class population of half a billion people. LCCs account for over 65% of air travel in India. IndiGo's market share has grown from 12.5% seven years back to 36.5% today. Every one in three domestic flyer here flies IndiGo. We are in a sweet spot. At present, India has 56 airports where a Boeing 737 or A-320 can operate. We go to 33 of them. As aircraft start arriving, we will go to the each of the other 23 places like Surat, Bhopal, Jodhpur and Jorhat apart from adding cities abroad too and adding frequencies on existing routes.
How have you managed to keep your costs low?
We do the sale-and-leaseback model for our aircraft.Each aircraft is taken on a short lease of six years and returned thereafter. We are a nine-year-old airline but the average age of our fleet is less than four years. So, a plane goes back before it gets old enough to start needing expense for repairs.
Qatar Airways boss Al Baker has for years shown interest in buying a stake in IndiGo.Why did you choose IPO route over FDI?
I thank Mr Baker for his kind words for IndiGo. We had no need for funding. We mainly chose the IPO route so that every three months, we are answerable to ourselves about our performance.
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