Wadia Group to invest Rs 510 cr in Go First to meet working capital needs

Funds raised will meet working capital needs of IPO-bound airline

Wadia Group, through its Mauritius-based entity Baymanco Investments, has decided to infuse Rs 510 crore into its airline Go First to meet its “working capital requirements” and for “general corporate purposes”, Business Standard has learnt.

In 2022-23 (FY23), Go First has taken at least two loans worth Rs 203.5 crore under the government’s Emergency Credit Line Guarantee Scheme to deal with its cash crunch.

In October, the initial public offering (IPO)-bound Go First had said its net loss more than doubled to Rs 1,807.91 crore in 2021-22 due to US-based Pratt & Whitney’s (P&W’s) delay in supplying engines and multiple waves of Covid-19 that affected air travel.

The company incurred losses of Rs 870.48 crore and Rs 1,270.92 crore in 2020-21 and 2019-20, respectively.

At its extraordinary general meeting on December 16, Go First proposed to “raise funds by way of 0.01 per cent compulsory convertible preference shares (CCPS) of the company of face value of Rs 10 each, aggregating to Rs 510 crore on a preferential basis through private placement, through two separate issuances and allotments”.

Baymanco Investments, a Wadia Group entity, will be allotted these CCPS within 12 months, according to company documents reviewed by the newspaper.

Once allotted, the CCPS will be converted into equity shares after five years at the price of Rs 75 per equity share, which means that 15 CCPS of the face value of Rs 10 each will be converted into two equity shares of Rs 10 each.

The funds raised through CCPS “are proposed to be utilised by the company towards working capital requirements and general corporate purposes”, the documents noted.

To accommodate the proposed CCPS issuances, the existing authorised share capital of the company of Rs 500 crore (Rs 450 crore in equity share capital and Rs 50 crore in preference share capital) was increased to Rs 960 crore (Rs 450 crore in equity share capital and Rs 510 crore in preference share capital), stated the documents.

Go First did not respond to Business Standard’s queries on this.

Go First has 57 aircraft in its fleet. About 40 per cent of it is currently grounded due to delays in the supply of engines by P&W.

As a result, Go First is currently operating just 1,359 flights per week, which is half of what it was operating in December 2021, according to aviation analytics company Cirium.

In October, Go First had said its IPO to raise Rs 3,600 crore was delayed due to the Omicron wave’s “severe” impact on international travel and the “unexpected” Russia-Ukraine war.

“Based on market prospects, the company will reinitiate the IPO process in consultation with the book-running lead managers,” the airline had stated.

A weakening rupee and rising aviation turbine fuel (ATF) prices have hit Indian carriers in FY23.

With rising passenger traffic, the cost of ATF, too, has jumped significantly in India in FY23 due to the Russia-Ukraine stand-off.

The cost of ATF comprises about 40 per cent of the total operating cost of airlines and impacts their financial viability.

The rupee has been weakening for the past several months, impacting airlines as they have to pay their aircraft lessors monthly lease rental amounts every month in US dollars.