Go Air issues DRHP ahead of IPO: Key risk factors to growth and expansion plans

Wadia-group owned Go Air, which recently rebranded itself "Go First" as part of its preparation for an initial public offering (IPO), has issued a Draft Red Herring Prospectus (DHRP) on May 14.

As part of the document, the aviation company suggested: "key risk factors" that could lead to "actual results" differing from "suggested forward-looking statements".

A DRHP is usually prepared by a company's lead manager and submitted to the Securities Exchange Board of India (SEBI) for approval of IPO.

Here's a look at the possibilities listed:

Certain important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the following:

>> The COVID-19 pandemic has had an adverse impact on our business, operating results, financial condition and liquidity, and the duration and spread of the pandemic or another pandemic could result in an additional adverse impact on our business;

>> We may be unable to successfully implement our ultra-low-cost carrier (or ULCC) model, due to a number of factors outside our control, including the continuing impact of COVID-19;

>> We may be unsuccessful in implementing our growth strategy;

>> We may be unable to fulfill our lease payment commitments under our aircraft purchase agreements with Airbus. Any inability to fulfill our commitments may result in contractual claims, penalties and impact our ability to source aircraft for our fleet and impact our ability to implement our ULCC strategy;

>> Our levels of indebtedness could adversely affect our business. Further, we may incur a significant amount of debt in the future to finance the acquisition of aircraft and our expansion plans;

>> Our business could be adversely affected if we are unable to obtain regulatory approvals in the future or maintain or renew our existing regulatory approvals;

>> We are in the process of re-branding our airline, and there is no assurance that our new brand will be successful or that there will not be any objections or litigation in relation to our new brand;

>> Our brand 'GoAir' and certain related trademarks, which we will continue to use until our transition to our new brand, and thereafter, are registered in the name of Go Holdings (in which one of our Promoters, Jehangir Nusli Wadia holds 99% shareholding) and not in the name of our Company.

>> We are exposed to certain risks against which we do not insure and may have difficulty obtaining insurance on commercially acceptable terms or at all on risks that we insure against today;

>> A failure to comply with covenants contained in our aircraft and engine lease agreements or our financing agreements could have a negative impact on us; and

>> Our entire current and projected fleet comprises Airbus A320 family aircraft, and any real or perceived problem with the Airbus A320 aircraft or our Pratt & Whitney engines could adversely affect our operations.

>> Rebranding of GoAir as Go First has also been listed as one of the risks. Notably, the company will continue to use GoAir till transition is registered under Go Holdings - held by Jehangir Nusli Wadia (99 percent). The company "intends to take necessary steps and pursue legal options to establish its ownership over all trademarks and 115 domain names", as per the DRHP.

"By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual gains or losses could materially differ from those that have been estimated," the document read.

It added that "there can be no assurance to investors" that expectations will prove to be correct and cautioned them to not place "undue reliance" on the forward-looking statements or regards it as a "guarantee of our future performance".