Ten years ago when Indigo was doing a roadshow for its IPO and talked to Rakesh Jhunjhunwala. Billionaire investor Jhunjhunwala was seen praising Indigo a lot. Jhunjhunwala told the airline officials that the low cost model is perfect for India. Jhunjhunwala had already researched IndiGo thoroughly and despite the severe ups and downs in the aviation sector in the last ten years, he was one of the few investors who continued to bet on aviation stocks. Even at that time his eyes were positive on Indigo.
Rakesh Jhunjhunwala had already supported IndiGo but in 2021 he took an even bigger step with Akasa Air. At that time the Corona epidemic was at its peak and the aviation sector was badly affected. Still, Jhunjhunwala invested money in Akasa Air by becoming a promoter in the company which started with just Rs 1 lakh. According to the ET report, Jhunjhunwala had so much faith in aviation that even in difficult times he bet on the new airline. Amidst the IndiGo shortage, there was a sharp decline in the shares of the airline, while if we talk about other airlines, there was an increase in the shares of SpiceJet. Now the question arises whether Akasa Air can also enter the stock market soon? Or the airline will still take time.
When can Akasa Air IPO come?
Now, after three years, Akasa Air has progressed a lot after starting commercial flights in August 2022. The company is now preparing to launch its own IPO. CEO Vinay Dubey has said that this IPO can come within two to five years i.e. at the earliest in two years or at the most in five years. Akasa is now becoming stronger and making its place in the market.
According to the report of Economic Times, Elara Capital’s expert Dixit believes that Air India will come very close to profitability by 2028. If this happens, the company’s valuation could exceed Rs 1.6 lakh crore because it currently has more than 300 planes and more than 500 are on order. Dixit says that the demand for air travel in India is very high, new airports like Goa are filled as soon as they are opened, hence investors are ready to invest money. According to him, there is enough space in the market and IPO of both Air India and Akasa can come easily.
The airline had issued ESOP
Akasa Air has issued a total of 13.4 million ESOPs to its employees between 2024 and 2025, starting from December 2021, and the face value of each share has been kept at just Rs 10. ESOP means employees get a chance to buy shares of the company cheaply. The largest share has gone to board member Aditya Ghosh who now holds 2.68 percent stake in Akasa. Along with him, Chief Commercial Officer Praveen Iyer and Chief Technology Officer Anand Srinivasan have also been given substantial ESOPs. Among the rest, the names of Chief Financial Officer Ankur Goyal, Legal Head Priya Mehra, Operations Head Floyd Gracious and Ajit Bhagchandani, and Human Resource Head Sejal Haribhakti Modi are also there.
All these are top level people of the company and by giving them this share option, Akasa wants to keep them with it for a long time. Currently, around 4500 employees are working in Akasa Air and despite being new, the company is growing rapidly. Giving such ESOPs increases the morale of the employees because if the company launches an IPO in the future or the share price increases, they will directly get huge benefits.
airline market share
Today IndiGo’s EBITA margin is 25 percent whereas Akasa Air is currently running at negative 21 percent, which means Akasa is currently incurring losses at the operating level. When IndiGo went public through IPO, its EBITA margin was around 32 percent, which was very good at that time. On the other hand, Akasa, which is a new airline, has only 5 percent market share.
These figures clearly show how long Akasa Air still has to go before it can launch a big public offering or IPO like IndiGo. Akasa is still far behind in scale (size of the company), profitability and market share. Indigo has been the market leader for years and its business is well established whereas Akasa has just started and will take time to grow. Currently, due to the ongoing operational crisis of IndiGo, the regulator has made a capacity reduction plan and some of IndiGo’s flights have been reduced. In such a situation, this situation can prove beneficial for Akasa because some part of IndiGo’s routes or passengers can come towards Akasa and the company can grow rapidly.
Investors want alternative to Indigo
There is a lot of discussion about IPO in the aviation sector and Gagan Dixit, Vice President of Elara Capital, who is an expert in oil, gas and aviation, says that investors want an airline IPO, but the company needs to be profitable first, otherwise the people doing valuation will ask for huge discounts, meaning they will invest money only by keeping the share price low. Dixit says that investors want an alternative to IndiGo because IndiGo is the only big listed airline and although it may seem expensive, there is no other option, there is no real competitor.
Air India can be a good candidate for this role but it is not listed yet, that is, it has not come in the stock market. Overall, investors want to see an IPO of a new airline which can compete with IndiGo, but for that it is very important for the company to earn profit so that it gets good valuation and investors can invest money without any fear. If any airline becomes profitable then its IPO will do very well because there is no big name in the market except IndiGo and people want to diversify.
