Low cost carrier GoAir, owned by Indian business conglomerate Wadia Group, has reportedly received a Rs 800 crore credit line from banks. The bank credit will help the airline to ease financial strain caused by the COVID-19 pandemic.
As per the report, Mumbai-based budget carrier had applied for a debt restructuring under the Reserve Bank of India's one-time debt restructuring scheme that was announced in August 2020.
With the fresh credit line, GoAir will not require to restructure its loans.
"Banks have extended credit of Rs 700 crore - Rs 800 crore to the airline. This funding will be sufficient for the company for the next couple of years. This also means the airline will not need any debt restructuring," said a senior banker, reported Business Standard.
The loan was extended to GoAir under the Emergency Credit Line Guarantee Scheme (ECLGS) 2.0, which is a part of Atmanirbhar Bharat Package 3.0 announced on November 12, 2020.
As per India Ratings and Research, GoAir overall debt stood at Rs 1,780.6 crore during the financial year ended March 31, 2020, while the credit metrics deteriorated in FY20 due to the decline in profitability. GoAir's profitability remains susceptible to volatile foreign exchange rates, as the company incurs a major portion of its operating expenses, including aircraft lease rent and aircraft repairs and maintenance, in foreign currency. Additionally, volatile movements in foreign exchange rates also impact the prices of Aviation turbine fuel (ATF), thereby affecting the profitability levels of the company.
The overall debt increased to Rs 2,027.61 crore as on August 31, 2020 on account of an increase in the short-term borrowings to fund the overall business requirement. Short-term borrowings also include borrowing from group companies in the form of ICDs. Ind-Ra believes the credit metrics would witness substantial deterioration in FY21 because of the sharp fall in the profitability and an increase in the overall debt levels.
GoAir is a part of the Wadia group, which has presence across diversified businesses such as fast-moving consumer goods, textiles, real estate and chemicals. Operational since 2005, GoAir is a no-frills airline with a focus on domestic operations. The company commenced its international operations in October 2018. It has a single aircraft fleet (A320 family) and has been aggressively adding A320NEO aircraft to it. The company has a fleet of 57 aircraft, comprising A320 and A320 Neo aircraft across 24 destinations in India, covering 90 per cent of the domestic market.