GoAir IPO: From COVID-19 to high debt, here are the key risks to growth

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Wadia Group-owned low-cost airline GoAir has filed a Draft Red Herring Prospectus (DRHP) with the capital market regulator.

GoAir IPO: From COVID-19 to high debt, here are the key risks to growth
Wadia Group-owned low-cost airline GoAir has filed a Draft Red Herring Prospectus (DRHP) with the capital market regulator Securities and Exchange Board of India (SEBI) for its initial public offering (IPO) to raise up to Rs 3,600 crore.
The company will offer fresh equity shares aggregating up to Rs 3,600 crore.
The company has also rebranded itself as “Go First” ahead of its IPO.
In its preliminary document, the aviation company suggested ‘key risk factors’ that could lead to actual results differing from 'suggested forward-looking statements'.
Here are the key risk factors, as mentioned by the company:
>> The COVID-19 pandemic has had an adverse impact on the business, operating results, financial condition and liquidity, and the duration and spread of the pandemic or another pandemic could result in an additional adverse impact on the business.
>> The company may be unable to successfully implement ultra-low-cost carrier (or ULCC) model, due to a number of factors outside its control, including the continuing impact of COVID-19.
>> It may be unsuccessful in implementing the growth strategy.
>> It may be unable to fulfil its lease payment commitments under the aircraft purchase agreements with Airbus. Any inability to fulfil its commitments may result in contractual claims, penalties and impact its ability to source aircraft for its fleet and impact ability to implement its ULCC strategy.
>> The firm's levels of indebtedness could adversely affect its business. Further, it may incur a significant amount of debt in the future to finance the acquisition of aircraft and expansion plans.
>> Its business could be adversely affected if it is unable to obtain regulatory approvals in the future or maintain or renew the existing regulatory approvals.
>> The company's in the process of re-branding the airline, and there is no assurance that the new brand will be successful or that there will not be any objections or litigation in relation to the new brand.
>> Brand 'GoAir' and certain related trademarks, which it will continue to use until the transition to the new brand, and thereafter, are registered in the name of Go Holdings (in which one of its promoters, Jehangir Nusli Wadia, holds 99% shareholding) and not in the name of the company.
>> The company is exposed to certain risks against which it does not insure and may have difficulty obtaining insurance on commercially acceptable terms.
>> A failure to comply with covenants contained in the aircraft and engine lease agreements or its financing agreements could have a negative impact on it.
>> The firm's entire current and projected fleet comprises Airbus A320 family aircraft, and any real or perceived problem with the Airbus A320 aircraft or Pratt & Whitney engines could adversely affect operations.

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