Sebi keeps approval to Go Air’s IPO on hold

According to reports, the Securities and Exchange Board of India (SEBI) has kept the approval of Go Airlines (India)’s Rs 3,600 crore initial public offering (IPO) on hold.

Sebi’s website exhibited that it had sought clarification from the ICICI Securities as the lead banker for the pre-issue on June 11. It further stated that the issuance of observation on the airline’s draft red herring prospectus has been kept in abeyance. On the other hand, the airline opposed from receiving any communication from the stock market regulator .

The airline owned by Wadia-group rebranded as Go First to place itself as an ultra-low-cost airline. In the past month, it had filed papers to obtain Rs 3600 crore through a share sale. The airline formulated to utilize the proceeds to meet its debt obligation, pay oil companies, replace letters of credits given to aircrafts lessors towards lease rent together with the future maintenance of the aircraft.

Sebi’s issuance of observations indicates approval for public offering. It is Sebi’s responsibility as a market regulator to review the documents handed in by the companies before giving them the approval for an IPO. It is necessary for a market regulator to put forward queries to the investment banks on an offer document.

Market experts suggested that an IPO issue is kept in abeyance when a violation committed is serious in nature. It would require a company to invest more than a month to address the issue before the regulator commence the vetting process afresh. They further explained that in this matter the exact observation issued by Sebi could not be ascertained, but the regulatory action could delay the airline’s fundraising plans.

In accordance to the documents, filed with Sebi, the Wadia family along with its company Go Investment posses 100 per cent stake in the airline. Around 22.56 per cent of Go Investment is pledged with a lender’s consortium. In the past nine months that concluded in December 2020, the airline experienced a loss of around Rs 470 crore on the total income of Rs 1,438 crore. As far as the consolidated financial statements which were a part of the IPO filing are concerned, the airline reported a loss of Rs 1,270 crore in the FY20 on a total income of Rs 7,258 crore.

While the negotiations with the lessors were underlined as a risk factor in the prospectus, the airline have been capable to manage a longer repayment schedule in one of its loans with the French lender BNP Paribas. On the grounds of the massive second wave of the pandemic the company have also received  positive feelers from lessors for further deferment of lease payment.

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