Proposed airfare cap on regional routes a holistic move: Ghosh

IndiGo’s President Aditya Ghosh today said the government’s proposal to cap airfares on regional routes at Rs 2,500 is a holistic move to expand the market, on a day when the shares of the airline’s parent company InterGlobe Aviation soared 17 per cent on debut trade.

The stock’s performance even “beat my own expectations”, he said on the sidelines of listing ceremony of the InterGlobe shares.

In afternoon trade, shares of InterGlobe rose nearly 17 per cent to Rs 892.95 on BSE.

“It’s fair on the part of the government to seek something in return (to help develop a larger market). In isolation, the capping ticket prices and the 2 per cent cess on air tickets may not look fair, but on the whole it will help develop better air connectivity,” Ghosh said.

In the draft aviation policy, the government has proposed a cap of Rs 2,500 on airfares in regional routes besides a 2 per cent levy on all air tickets to boost air connectivity.

Ghosh said the new regional connectivity plan would help open up huge opportunities for regional airlines but was quick to add that his airline has no immediate plan to enter the sector as his present plane types do not suit that.

“Entering the regional aviation space does not make sense for us now as our current planes are not economically suited for that,” he said.

He also added that IndiGo has no plan to expand its international operations as of now.

Noting that the airline, launched on August 6, 2006, has grown to fast in scale of operations, complexity and delivery, Ghosh said, “the risk is not about demand, which is already there in aplenty. But the risk is about execution and meeting those demands.”

On the new proposed aviation policy, he said he would prefer “a policy and regulatory environment that is fair on everyone in the industry and not just a few. What we need is a fair policy environment that gives a level-playing field to all stakeholders and not just some getting pitched against the rest and vice versa.”

When asked about whether the company’s networth has returned to positive territory, Ghosh answered in the affirmative but refused to share the number saying listing related regulatory requirements does not allow sharing of specific financial information.

While filing for the IPO the company had said its networth had turned Rs 439 crore negative as of June 30, the day it filed for the IPO, after the management and promoters took out a huge Rs 1,500 crore in dividends.

When asked about whether he is a relieved man today with the stock not doing an encore of what the Cafe Coffee Day stock (which tanked 18 per cent on the listing day), given the negative sentiment across the markets, he said, “for the past few months, we hardly slept for 3-4 hours.

“We were asked those questions by regulators, analysts and i-bankers, which we thought never existed. But this huge success to our IPO and listing also increases the pressure and responsibility on us as we have to now get back to the public every three month with all the facts,” Ghosh, who has been with the airline from day one, said.

However, he was quick to add that “IndiGo has a battle-ready management and will overcome every challenge as in the past and will deliver much more than what we have been delivering so far.”

He also described the IPO process was the toughest point in his days at the airline.

Today, Indigo has 98 planes in service and has 430 more in order, which makes it the largest for any airline in the world. At the peak of the global crisis, it had ordered 180 Airbus planes which was followed up with another order of 250 Airbus planes in August last year.

Out of the 98 planes in operation, as many as 75 are on operating lease, a business model which has helped it lower costs.

The airline counter opened at 17 per cent premium on the issue price of Rs 765 today on the NSE, and touched a high of Rs 898, a sharp gain of 17.38 per cent, taking its market valuation to over Rs 31,702.4 crore.

The company’s IPO, the biggest in nearly three years and the first from the sector since 2005, had elicited robust response as the issue got over-subscribed 6.15 times last month.

This was the biggest IPO in the market since Bharti Infratel’s over Rs 4,000-crore public offer in December 2012.

InterGlobe has raised Rs 3,008.5 crore at issue price of Rs 765 per share from its recently concluded, over-subscribed initial public offer.

Qualified institutional buyers lapped up the issue 17.80 times, while the portion for non-institutional investors saw 3.57 times subscription. The category set aside for retail investors was subscribed 92 per cent.

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