India’s largest passenger carrier, IndiGo, has decided to increase its borrowing limit to Rs 10,000 crore as the airline enters a new phase of growth. Previously, the airline’s board had put a borrowing limit of Rs 2,500 crore.
The decision to increase the borrowing limit was taken by the board of directors of the Rahul Bhatia-promoted Interglobe Aviation, the company that runs IndiGo, at an extra-ordinary general meeting held on October 29, as per a filing on the Registrar of Companies earlier in November.
“The business has increased substantially as there has been acquisition of new aircraft to cater to new sectors,” the company said in the filing. “Accordingly, your company would require long-term capital funds to sustain the increasing level of operations that would necessitate borrowing from the market.”
IndiGo has one of the lowest debt levels compared with its peers. The indebtedness of the company as of September 20, the date of its last annual general meeting, stood at R1,139 crore.
Since 2007, the airline has gone from being a 18-aircraft fleet with 2,000 employees serving 17 domestic destinations to a 60-aircraft fleet with nearly 6,000 employees and flying to over 32 international and domestic destinations.
The airline, spearheaded by president Aditya Ghosh, has kept its debt levels low primarily because it operates a successful sale and leaseback model. The airline sells the aircraft immediately on acquisition and leases it back enabling the airline to have a younger average fleet age.
IndiGo turned profitable in 2008 and has remained so ever since. Earlier this year, owing to problems at Kingfisher Airlines and a cutback in capacity, IndiGo climbed to the number one spot in terms of passengers carried, a distinction it has not yet ceded.
Airline officials declined to comment on the need to raise the borrowing limit and on the amount of funds it required.
The Delhi-based low-cost carrier has a large number of planes on order.
Deliveries for IndiGo’s 2005 order for 100 of the Airbus A320 planes worth $6 billion is still in the process of completion. After 2016, the airline will start receiving deliveries from a 2011 order for 180 of the Airbus A320s and A320neo worth $15.6 billion.