IndiGo co-owner InterGlobe Enterprises Friday confirmed it has shown interest to buy Virgin Australia, the 20-year old carrier that became one of the first serious casualties of the Covid-19 crisis by entering into administration last month.
The company “has signed an agreement to participate in the sale process and is bound by the confidentiality requirements of that agreement. We are unable to say anything further at this stage,” it said in a statement.
Kapil Kaul, South Asia CEO of CAPA-Centre for Aviation said InterGlobe has “solid credentials” as a bidder.
Others said Virgin Australia was a valuable investment
“Virgin Australia’s value is not just the cash & aircraft (and other assets) but its position in a stable and established aviation market i.e. Australia. There is enough for two airlines to do well in that market. Australia has always longed to have closer business ties with India. There’s a sizeable Indian diaspora in Australia. And of course, there’s cricket!,” said Shukor Yusof, founder of Malaysian consultant Endau Analytics.
“During Narendra Modi’s last trip there he said Australia was “at the centre of India’s thoughts”. But talk is cheap and perhaps Bhatia – if successful in this bid – could be the start of something big,” he added.
Others were more skeptical.
“After the mainly foreign ownership problems with Virgin Australia the push is for it to be mainly Australian owned,” said Geoffrey Thomas, an Australian aviation veteran and editor-in-chief of Airlineratings.com.
“If InterGlobe was to run it as a super low cost airline like IndiGo I do not think it would work. The value in Virgin Australia is its 10,000 staff and 11 million frequent flyer members who are supportive of its current market premium model,” he added.
InterGlobe owns 37.87% of IndiGo, India’s largest airline by market share, which earlier this week clarified it is not part of any investment proposal for Virgin Australia. InterGlobe has interests in travel technology services and hospitality.
“I do not think this has anything at all to do with IndiGo’s business plan. It is a portfolio investment by the parent, where InterGlobe is an investor and the assumption is that professionals will manage it,” said a senior executive at a rival carrier.
Virgin Australia Holdings is based in Brisbane. Founded in 2000 as Virgin Blue, it evolved from a low cost carrier to a hybrid airline to its current form as a global premium carrier.
The airline has a complex shareholding of entities that include China’s Nanshan Group, and HNA Group apart from
Singapore Airlines and Abu Dhabi-based Etihad Airways. Founder Richard Branson, through Virgin Group, remains a 10% shareholder.
The Virgin Australia Group’s subsidiaries include Virgin Australia Regional Airlines and Tigerair Australia.
It entered into voluntary administration on April 21, saying it sought to emerge “in a stronger financial position on the other side of the COVID-19 crisis”. It went down with $7 billion of debt and according to reports, $100 million in cash. It had to suspend almost the entirety of its operations owing to the crisis.
According to latest annual filings with the registrar of companies, Ministry of Corporate Affairs, for FY19, InterGlobe had a strong balance sized Rs 18,922 crore as of March 31, 2019. The biggest chunk of that—Rs 15,068 crore-was invested in IndiGo.
Of the balance, Rs 2,007 crore was invested in mutual funds and the rest in its other subsidiaries. It had current liabilities of just Rs 16 crore.
The company posted total revenue of Rs 492 crore in FY19, down 28% on year. Of the revenue, Rs 87 crore came from dividend income compared to Rs 52 crore a year earlier.
Net profit fell to Rs 288 crore from Rs 585 crore a year earlier. Business intelligence company Veratech helped in the compilation of the figures.
Interglobe didn’t respond to additional queries.
Media reports, primarily from Australia, said administrator Deloitte had eight bids on Friday. Names of reported investors including Canadian asset manager Brookfield with Queensland state-owned investment company QIC; Melbourne private equity firm BGH with AustralianSuper; US firm Bain Capital and mining tycoon Andrew Forrest, apart from InterGlobe. The list will be further shortened to three on Monday.
Source: Economic Times