‘Complacency will be the only risk for us’

Varun Aggarwal Mumbai | Updated on January 23, 2018

ADITYA GHOSH, President & Executive Director, IndiGo

India’s largest airline IndiGo announced its initial public offer worth ₹3,200 crore based on the higher end of the price band of ₹700-765. The company plans to use part of the proceeds to reduce its debt, increase its fleet and expand operations. Speaking to BusinessLine, IndiGo President and Executive Director Aditya Ghosh said the company will continue to expand in India rather than looking to go global and will look at every possible way to cut costs. Edited excerpts:

With healthy cash reserves what was the need to go for an IPO?

That’s the question we struggle with the most internally. It’s because every organisation gets to a stage in life where you hit a milestone and being a listed company creates that legitimacy. Secondly, it improves our credit rating going forward.

Thirdly, for an airline such as IndiGo where there is little competition, it prevents us from any complacency or arrogance setting into the team.

Do you think IndiGo’s valuation is extremely aggressive?

If you compare us with any other airline in the world, you’ll find out that our valuation is not at all aggressive.

It’s in the interest of the promoters as well as the management team to see that the stock price and the value grow. With that, the value of investors will also grow. So, if we were exiting the business, it would’ve been a concern.

This is an airline that is building itself out for the next 10, 15, 20 years. Our whole objective is to create a large, very profitable, sustainable airline and airplane network across the country.

You have been criticised over giving out high interim dividend just before the IPO, leading to a negative net worth. Would you continue this dividend policy post IPO?

We’ve paid out interim dividends every year. Negative net worth was as of that date (June 30, 2015). We are already more than three months ahead. Do the math and you’ll figure out the answer.

We don’t have a written policy on dividends but if you look at what’s our view on cash and what’s our view on dividend, it’s very simple. We are cash flow generating, we are profitable, and we hardly have any capex requirements. So, every year we sit down and decide what might be some of our capex requirements, what’s happening with the marketplace and that surplus cash flow is given out as dividends. In the last four years, we have paid out more than $600 million in cash as dividends.

In 2012, though we could have declared a dividend, we did not. Because we felt that with the market dynamics at that time, it was more prudent to keep the cash within the company.

Going forward, our view would be exactly the same that we’ll do what’s in the best interest of the business, keeping shareholders in mind. Shareholders put in money to get a return. We hope we are able to deliver those returns.

What will be the biggest risk for the company?

Complacency will be the only risk for us.

Published on October 19, 2015

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