IndiGo IPO: Promoters flying high with dividends to themselves

InterGlobe Aviation, which runs IndiGo airlines, turned a negative net worth of Rs139 crore due to an exceptional interim dividend of Rs1,500 crore paid to the promoters in FY15


InterGlobe Aviation Ltd that operates IndiGo airlines is planning to raise over Rs3,200 crore through its initial public offering (IPO) next week. The draft red herring prospectus (DRHP) filed by the company, however, raises several questions. It shows that since April 2010, the company has paid cumulative dividend of Rs3,700 crore to promoters, when its total profit after tax (PAT) was Rs3,914 crore. However, the PAT figure of Rs3,914 crore includes a credit of Rs473 crore for minimum alternate tax (MAT), so the real net profit of the company is Rs3,441 crore. In other words, the promoters took about Rs260 crore more than what was due to them during this over five-year period.
Further, a dividend tax outgo of Rs423 crore means not only the carrier company has dipped into its reserves (for paying to promoters) but also has a negative net worth with the commencement of its offering. 
InterGlobe Aviation, in its DRHP says, "On 19 June 2015, our Company declared an interim dividend (excluding dividend distribution tax) of Rs99.738 million (Rs99.74 crore) for fiscal 2015 and an interim dividend of Rs10,029.10 million (Rs1002.91 crore) for fiscal 2016, each for 307,000 equity shares. On 12 January 2015 and 23 March 2015, our Company declared an interim dividend of Rs5,932.37 million (Rs593.24 crore) and Rs2,260.23 million (Rs226.02 crore) for fiscal 2015, each for 307,000 equity shares, respectively. The restated financial statements provided in this Draft Red Herring Prospectus do not reflect these interim dividends. Any reliance by persons on the financial disclosures presented in this Draft Red Herring Prospectus without considering these interim dividend payments should accordingly be limited."


The company had turned a negative net worth of Rs139 crore due to an exponential interim dividend of Rs1,500 crore paid to the promoters for 2014-15. In a media report, Aditya Ghosh, President of InterGlobe Aviation, was quoted as saying that the company's turning a negative net worth was a 'non-event' and it still had 'a cash balance of over Rs3,500 crore'.
In addition, the promoter and promoter group entities would earn over Rs1,600-1,900 crore through their share sale (offer for sale-OFS). This is in addition to the Rs3,700 crore dividend they had already received.
In September, the airline firmed-up its earlier order of 250 Airbus A320 neo aircraft. The deal is expected to be worth a little over $25 billion. At present it has a total order of 430 airplanes. Apart from the recent order, InterGlobe Aviation had placed an order for 100 A320s in 2005 and 180 A320neo in 2011.
It added 17 new aircraft in its fleet during 2014-15. Currently it operates 97 aircraft offering 648 flights a day.
The company, in the DRHP says, "We receive non-refundable incentives from manufacturers. The application of these credits to our operating leases results in a net reduction in our aircraft rental payments which is amortized over the initial terms of the operating leases."
Accordingly, the company over the past five years has received Rs1,654 crore as incentives from Airbus. Its balance sheet, however, shows similar amount of Rs1,646 crore as still receivable. 
"The Company receives non-refundable incentives from manufacturers in connection with the acquisition of aircraft and engines. In case of owned aircraft or aircraft under finance lease, incentives are recorded as a reduction to the cost of related aircraft and engines. Where the aircraft is held under operating lease, the incentives are deferred and reduced from the operating lease rentals on a straight line basis over the period of the related lease. In case of return of an aircraft before the expiry of the lease term, the unamortised balance of deferred incentive is recorded in the Statement of Profit and Loss," InterGlobe Aviation stated in its Prospectus.
Our emails sent to Mr Ghosh and the company Chief Financial Officer remained unanswered till writing the story. When we contacted their office, we were told that both these officials are not in the office. We received a call from the company's PR agency, which promised to send us replies by 3pm. However, there is still no reply. We will incorporate InterGlobe Aviation's reply as and when we receive it.
The IPO will open between 27th and 29 October 2015 with a price band of Rs700-765 per share.



Auditors deny signing audit report of C Mahendra Exports

RH Modi & Co in a newspaper advertisement denied signing the auditor’s report of listed company C Mahendra Exports for FY2015


Mumbai-based auditors RH Modi & Co have published an advertisement in local newspaper saying that the firm has not signed Auditors Report of C Mahendra Exports Ltd for FY2014-15. The company is listed on both BSE and National Stock Exchange (NSE). 
"C Mahendra Exports Ltd...have in complete illegal and malafide manner filed, uploaded and circulated the Annual Report with the financial results of the Company for the Financial Year 2014-15 and the Auditors Report dated 7th September 2015 purporting that the financial statements have been audited and Auditors Report signed by us," RH Modi & Co said in the advertisement.
According to the company's regulatory filing, it had filed its revised financial results for 31 March 2015 (Audited) on 5 September 2015. Within a fortnight, it filed Revised Audited Financial Results for the quarter and the year ended 31 March 2015. Both these filings are without auditors report. In fact, in both filings, the company had stated, "The above results were reviewed by the Audit Committee and approved by the Board of Directors at its meeting held on 26 August 2015.
However, the company website displays its Annual Report for FY2014-15, including the Auditors Report. Modi & Co has however denied signing any such report. 
"...neither the financial statements for the year ended 31/3/2015 are finalised by us nor the purported Auditor's Report given in the Annual Report signed by us. Also despite our strong objections to the passing of the Company's accounts in their present form, the same have been passed by the Shareholders of the Company in the Annual General Meeting held on 26 September 2015," the audit firm says.
RH Modi & Co says it has sent several letters to the Company and concerned authorities, including NSE, BSE, Securities and Exchange Board of India (SEBI) and Registrar of Companies pointing out the gross irregularities and dishonest of the company.
However, according to a senior auditor, since they (RH Modi & Co) were appointed as auditors, they could have signed the report with all qualifications. 
In its revised financial results for 31 March 2015, the diamantaire and jewellery company had stated that its assets have been declared as non-performing assets (NPAs) by a consortium of bankers and have also freezed all working capital facility granted to the company. "Company's operating results have been materially affected due to various factors including non-availability of finance in view of the consortium bankers recalling the financial facilities granted, symbolic possession of premises have been taken by the Bankers," the statement says.
Further, it says, "There is ongoing dispute between the Promoters of the Company. However no financial adjustment is required to be made in the financial statement on account of this dispute."
As on 31 March 2015, promoters held 60.02% stake in the company. Second largest shareholders in the company at 13.15% were individual investors holding nominal share capital of up to Rs1 lakh. The promoters include Mahendra Chandulal Shah (14.92%), Kanu Chandulal Shah (8.53%), Champaklal Kirtilal Mehta (8.11%), Pravin Chandulal Shah (7.82%), Sandeep Mahendra Shah (5.69%), Suresh Kirtilal Mehta (5.31%), Prakash Kirtilal Mehta (3.81%), Paraskumar Champaklal Mehta (3.73%), Samir Pravinchandra Shah (2.01%) and Pravin Kirtilal Mehta (0.1%).
At 2.20pm Wednesday, C Mahendra Exports was trading marginally down at Rs2.20 on the BSE, while the 30-share benchmark was also marginally down at 27,294.



mm sundram

2 years ago

The company made several gross violations and wrongs but the RoC of Mumbai & Debi not had taken any kind of corrective action to protect the retail investors interest. Despite of repeated investors complaints the S,EBI & RoC not insisted any steps to protect. What is very interesting is the Debi allowed this company to issue bonus shares vety recently (1:1) and also was going to give permission to convert the preference shares into equity which are all stopped with my repeated complaints. Government authorities are not protecting the investors monies


shanti Patel

In Reply to mm sundram 2 years ago

Mr. Sundram,

Please give your email id.Give email ids of ROC adn SEBI where you lodged the complains.
Joint Hon Secretary-Bombay Shareholders Association

shanti Patel

2 years ago

In this country, you can not see any action from the regulators.The officers of the regulators are busy only to attend seminars and giving lectures.

The laws should be enacted to make them accountable and punishment for inaction on failure to act when they should act swiftly in the interest of various stakeholders.

Hon.Joint secretary-Bombay Shareholders Association

HDFC Bank posts 20% growth in net profit

According to HDFC Bank, its gross non-performing assets (NPAs) were at 0.9 percent of gross advances as on September 30, 2015, as against one percent as on September 30, 2014


HDFC Bank closed the second quarter of the current fiscal with around 20% growth in net profit as compared to previous year's corresponding period, the private sector bank said on Wednesday.
The bank posted a net profit of Rs.2,869.45 crore for the period ended September 30, 2015, up from Rs.2,381.46 crore posted the previous year, the bank said in a statement.
The bank's total income for the quarter ended September 30, 2015, was Rs.17,324.28 crore - up from Rs.13,894.73 crore for the quarter ended September 30, 2014.
Net interest income (interest earned less interest expended) for the quarter grew by 21.2% to Rs.6,680.9 crore from Rs.5,511.0 crore the previous year driven by average assets growth of 29% and a net interest margin for the quarter of 4.2%, the bank said.
Total deposits were Rs.506,909 crore, an increase of 29.7% from the previous year.
Advances as of the quarter ended this year were Rs.418,541 crore, an increase of 27.9%  over September 30, 2014.
According to HDFC Bank, its gross non-performing assets (NPAs) were at 0.9% of gross advances as on September 30, 2015, as against 1% as on September 30, 2014.
The net NPA were at 0.2% of net advances as on September 30, 2015.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


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