Indian operator Pawan Hans is looking at various options for the near future in order to entice potential investors at the as-yet-untimed point when it hopes to offer shares in a Initial Public Offering (IPO). These include expanding its existing seaplane operation, and various new income streams such as heliport/helipad operation, operation of small fixed-wing aircraft and the estabishment of a Maintenance, Repair and overhaul (MRO) division. The latter includes a facility planned at Rohini Heliport in Delhi and Juhu Heliport in Mumbai.
The construction of Rohini Heliport is progressing and an independent internal committee has been pulled together to manage the project. The company intends to manage and operate to develop more such heliports to promote regional connectivity in various parts of the country.
Government-owned Oil & Natural Gas Corporation currently holds 49% of the company, with the Indian Government owning 51% direct. The Government has agreed to convert a loan to Pawan Hans to an equity stake to ease the IPO through the capital markets. While this will take their direct holding up to 69% (according to the Economic Times), any further interest will reportedly be waived. The loan dates back to 1986, and was initially for 130.91 crore rupees ($19.3M), and none of the capital amount has been paid back. In the next 15 years, a total of 339.31 crore rupees ($50.0M) of interest accrued, and which point the Government stopped charging interest. The loan and interest balance of 470.22 crore rupees ($69.3M) is thus being written off.
In financial year 2014-15, Pawan Hans turned over 538.15 crore rupees ($79.3M), and clearly a existing loan balance expressed as 87% of the year’s turnover is enough to make any entrepreneur wince. If the Government had continued to charge interest, we could be looking at a debt figure of around 850 crore rupees ($125M), with no attempts made to pay back any balances, which seems surprising in a country where the entire economy is doing well, against the global trend. The situation will no doubt come under close scrutiny by potential investors who would look at how viable the whole business model is to service debt in the future, even though the company’s financial statements will look a whole lot better with the transition of this debt to an equity share. That’s what an investor’s “due diligence” is all about.
With the IPO plan under review by SBI Capital Markets (the investment banking arm of State Bank of India), the whole restructuring move sounds all rather incestuous.
Pawan Hans has a fleet of 43 helicopters, including 17 365N Dauphins, 15 365N3 Dauphins, 3 Mi-172s, 3 LongRanger IVs, 3 Bell 407s and two 350B3 Squirrels. It also operates six HAL Dhruv helicopters for the Indian Border Security Force and manufacturers HAL. The company has plans to add a further 20 helicopters over the next four years, including 10 in the next year.
Jeremy Parkin – HeliHub.com
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