Monday, November 12, 2018

IndiGo's Kapil and Rahul Bhatia: Hitting an air pocket

Bearish investor sentiments for the InterGlobe Aviation stock saw the father-son duo of Kapil, 86, and Rahul Bhatia, 58, lose almost a billion dollars in their combined personal wealth. InterGlobe Aviation owns and operates India’s largest and most profitable airline, IndiGo. The former is executive chairman while the latter is group managing director of InterGlobe Enterprises, which has a 38 percent stake in InterGlobe Aviation; they are ranked 41 on the 2018 Forbes India Rich List, with an estimated net worth of $3.55 billion. Last year, they were at No 31 with a fortune of $4.4 billion.
This is the first year that the Bhatias have seen their personal wealth fall, after having seen it more than triple from $1.29 billion in 2012 to $4.4 billion last year. Clearly, InterGlobe Aviation’s share price, which fell from ₹1,250 apiece in September 2017 to about ₹850 apiece this September, has had a direct impact on their wealth.
While InterGlobe Enterprises has other business interests spanning hospitality, real estate, IT and BPM services, the bulk of Bhatias’ wealth comes from their listed airline entity. IndiGo is arguably among a few highly profitable airlines globally. “But there has been a sharp dip in profitability since January 2018,” says Kapil Kaul, CEO, CAPA South Asia, an independent aviation consulting, research and knowledge practice firm.
On October 24, IndiGo posted a net loss of ₹652.13 crore for the July to September quarter of FY19 compared to a profit of ₹551.56 crore a year ago. However, the airline reported revenues of ₹6,514 crore, an 18 percent growth over the same period a year ago.
“Aviation in India is facing significant pressures from high fuel costs, rupee depreciation and intense competition, all of which have impacted our profitability this quarter,” Rahul Bhatia, interim chief executive officer, IndiGo, said in a press statement. Forbes India reached out to him for a comment, but there was no response till the time of going to press.
In the April to June quarter, IndiGo reported a meagre ₹27.8 crore in profit compared to ₹811.1 crore in the same period a year ago.
Besides, for FY18, the company’s board of directors recommended a paltry dividend of ₹6 per share as against a payout of ₹34 per share in the previous fiscal. The decision was taken to bulk up the company’s free cash reserves for the outright purchase of aircraft which, in the long run, would reduce operating costs and result in higher profitability. It also reflected a change in IndiGo’s fleet acquisition strategy, which was to purchase aircraft on a six-year sale and leaseback model from lessors.
12/11/18 Anshul Dhamija/Forbes India