Friday, October 28, 2005

Air India IPO may raise up to Rs 3800cr

The government may raise between Rs 2,400 (Rs 24 billion) and Rs 3,800 crore (Rs 38 billion) by taking India’s international flag carrier Air India, AI, to the capital market, reports The Economic Times.
Merchant banking sources base this on the assumption that government will make available 20-25% of the airline stock to investors in the IPO, which going by its paid-up capital of Rs 153.84 crore (Rs 1.53 billion), will translate to around 3/3.82 crore shares (of face value Rs 10).
If the Jet Airways book building price band (Rs 950/1,100) is taken as the benchmark, even after discounting because it’s a government company, the AI share may be placed at Rs 800/1,000. The IPO can fetch between Rs 2,400/3,000 crore (Rs 24-30 billion) for 20% stake at Rs 800 and Rs 3,000-3,800 crore (Rs 30-38 billion) for 25% equity at Rs 1,000.
Sources said this is a ballpark estimate and the final numbers will depend on the airline’s valuation and how much money government wishes to raise through this process.
It will also depend on whether the government still proposes to use these funds - partly or fully - to support the airline’s USD 7/8 billion fleet expansion programme.
While AI’s paid-up capital is a modest Rs 153.84 crore (Rs 1.53 billion), its authorised capital is Rs 500 crore (Rs 5 billion). While technically, the government can float shares with total face value of around Rs 150 crore (Rs 1.50 billion) (15 crore shares @ Rs 10 each giving the new investors just under 50%) and retain 51% or more in the company, the civil aviation minister has already given indications that not more than 20-25% stake will be sold.
Jet Airways, the only other airline to hit the market recently, raised nearly Rs 1,900 crore (Rs 19 billion) by offloading 20% equity, leaving the promoters with 80% stake.
DSP Merrill Lynch, which has been engaged by AI to draw a roadmap leading to the IPO, is likely to revert to the airline in November with its report.
While the valuation of the airline will depend on several factors, sources say of importance will be its firm plan to acquire 68 planes to grow its international market share and brand eminence.
The airline also holds critical landing slots in a string of international airports, which has become a tradeable commodity for many carriers in the current scenario of high competition and demand.
The airline has also been consistently clocking profits for the past four years. Despite the sharp jump in its fuel bill, AI still expects to stay profitable this fiscal. Last fiscal; its EBITDA was Rs 1,200 crore (Rs 12 billion), net profit Rs 92.32 crore (Rs 923.2 million), topline of Rs 7,500 crore (Rs 75 billion).
This year, the airline is aiming at a turnover of about Rs 8,200 crore (Rs 82 billion), which clubbed with the revenues of group companies (Hotel Corpn of India, AI Charters, AI Air Transport etc), may well touch the USD 2 billion mark (Rs 8,500/8,600 crore @Rs 44 to a dollar).


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