Bhadra wrote:Hey guys, nice meeting you all - it's my very first post in here. I'm a financial analyst/fund manager by occupation and an aviation enthusiast. I've been following several forums in here for a while now and for most part, I'm impressed by the depth of information that you guys have - thanks for sharing, you have my sincere appreciation for that.
I do have a question for you guys though. There are close to a dozen references to the term 'hot money' by user 'BawliBooch' just on this page and most of it is with reference to the source of funding for Interglobe Aviation. Can someone tell me what it is?
Disclosure: As part of my work I've done extensive assessment of the financials of Interglobe Aviation and I'm of the opinion that it is one of well managed (financially and operationally) public companies in the country (not just in civil aviation industry).
Obviously, I'm a little surprised to find that someone has figured out a discrepancy in reported financials of the company that I haven't. Oh, please respond with facts only and spare me your inner voice. Thank you!
You will find there is disagreement on the quality of Interglobe's numbers. I am satisfied and see excellent performance in a challenging market. Going from memory, they did a small equity sale. They also bought NEOs in bulk at attractive pricing. They are able to sell the aircraft to leasing companies for more than their contract price. This is called a sale/leaseback. However, they are doing a mix of operating leases and purchase leases. For those not in the know, at the end of an opperations lease, the leasing company gets the aircraft and escrow account for maintenance. In a purchase lease, at the end Indigo owns the aircraft and maintenance escrow account.
Last quarter maintenance due cost more than the account (due to CEO lease extensions and I believe high Indian taxes).
But this is a Jet thread. The comparison is why Jet and other Indian Airlines are struggling while Indigo grows quickly.
There is angst on the quick growth. I believe quick aviation growth is stimulating the Indian economy. But the new passengers are frugal. Others believe there is too much competition. As someone who believes in economic growth and that air travel is an elastic market, I see continued fast growth. Others want to see a breather.
Since you are familiar with Indigo's numbers, you already know they made a small profit and slightly reduced their debt last quarter while improving their cash situation. You would also know they have pre-allocated much cash for future aircraft purchases. I speculate that they are keeping dollars/Euros and other currencies out of India as a hedge on further Rupee depreciation as they will spend that on aircraft anyway.