IndiGo's 20-day profit covers Rs 139 crore negative net worth

New Delhi: Ahead of the Rs 3,000-crore IPO, IndiGo's parent InterGlobe Aviation Wednesday said twenty days of profit could cover its negative net worth of Rs 139 crore at the end of the June quarter.

Asserting that InterGlobe has been profitable for the last seven years with good cash flows, IndiGo's President Aditya Ghosh said it has a well thought out strategy that delivers a sharply lower cost structure.

The initial public offer opens on October 27 and the price band is fixed at Rs 700-765 apiece.

"On June 30, technically there was a negative net worth. That negative net worth is Rs 139 crore and on that day, we had Rs 3,600 crore cash. Absolutely there is no question of concern...," Ghosh told PTI.

According to him, the negative net worth is worth 20 days of profit for IndiGo. "In the first quarter we earned Rs 7 crore a day net profit. We are now sitting three-and-a-months after that (June 30) and naturally the negative net worth becomes positive net worth," he noted.

When asked whether how much the company has gained after wiping off the negative net worth, Ghosh declined to comment citing that it cannot give futuristic outlook before the IPO.

"The net worth of our company was Rs 4,262.20 million (Rs 426.22 crore) and Rs (1,393.87) million (Rs 139.39 crore) as of March 31, 2015 and June 30, 2015, respectively, as per the restated financial statements of our company prepared in accordance with Indian GAAP and restated in accordance with the ICDR Regulations," according to the final offer document.

Net worth is the aggregate of the paid-up share capital, share premium account, reserves and surplus. The figure excludes aggregate of miscellaneous expenditure.

In the latest June quarter, IndiGo posted a net profit of Rs 640.44 crore. During the same period, total revenues stood at Rs 4,317.19 crore.

For the year ended March 2015, the carrier recorded a net profit of Rs 1,295.58 crore on revenues of Rs 14,309.14 crore.

The IPO comprises fresh issue of shares worth Rs 1,272.2 crore and the revised Offer for Sale(OFS) size that would be about Rs 1,746 crore. Together, the share sale can rake in up to Rs 3,018.2 crore.

When asked whether promoters are feeling jittery as some of them deciding to sell less number of shares than proposed earlier, Ghosh replied in the negative, adding that the exact quantum of sale was not finalised before.

The much-awaited IndiGo IPO will also be a test case for revival of the primary market as the smaller public issue of Coffee Day Enterprises saw a lukewarm initial response even though it managed to sail through last Friday.

With three promoters -- Rakesh Gangwal, Shobha Gangwal and Chinkerpoo Family Trust -- deciding to offload less number of shares in the company, the IPO size has come down by Rs 250 crore to Rs 3,018 crore. On the basis of earlier proposal, the initial share sale could have fetched up to Rs 3,268 crore.

These figures are based on the upper price band of Rs 765 a piece.

Ghosh said that the need for an IPO is based mainly on various factors, including that it would help improve the company's credit rating.

"One it improves our credit rating as we work with many lessors in the world... Secondly, many of the earlier people have been invested in the company for around 10 years and we also can see encashment of some values and realisations," he added.

Citing its cost structure, Ghosh said there is high predictability of cost and increased focus on ancillary revenues adding that the company "will increase the frequency (of flights)".

With a fleet of 98 aircraft, majority of which are on operational lease, IndiGo currently flies to 33 destinations.

According to Ghosh, the average age of its fleet is around four years and having a young fleet mean that less fuel is burnt.