uv Dr Bawa To 06 ‘over story oom IndiGo has been much ‘more efficient with its use of share capital SoRaaraE IndiGo has made profits for five successive years while Jet and Spiceset have lost money — Indico’s borrowings are much lower than rivals’ IndiGo Vs Competitors with a) promoter fangs Inc Grew its revenue by 35 times Indico isthe only airine to continuously make profits. Sa 1200 / _With lesser borrowed money Meanwhile, indico's fleet has ‘grown faster than rivals’ THE SECRET OF INDIGO’S ele SSIS PROFITS Ogeechee ty Peer megan eat) Pree ease eta! Conmearcon ister SOL eg ee eer eee ceviryenentieny iene Perera Erato sg riots Cet eters nna eres peer eT ery perience rngSoaring Proms ‘What ithe secre ofindie's continued pros? ‘heaiinekasong ben asec of meres or ‘irae and ancl analyte roel: ‘ce they experince on board and planes that Fenn tine Analyte hve speculated ndiGo ‘lowe vt ma pb earings ait nosed that emesis os money Fo Under ths wansacton, operators ell newly cured alrratto easing eotopantes dina pall wansacton lease these aerate The bricestichtheaseaftisoldtoslessing om Danis tually higher than the pice pla ‘alate Boeing ot Abas ‘Bot nterGlobe eiation =the company that runs nde ~rased eyebrows when revealed hati nobake prods tuouph these and Teme oute tate ist meta inion ‘hovetogo pute wihusannualreculs) ‘Ghoti made sm operating olof223 ace aie sad witentspec ‘sont angeprtl anes ge ‘ued sealers On how {ico conpaesto deliver rots, Choe sad te ‘iuiomenarerewardeghsaineforfostegen probe bas ep even boring True, hos and his team un an anova nde atine reputation for punculty habelpedindGeanotilsaing, dgeraae thanfullservicecompentorskeeAraysand ‘linda on many owes. Fares acaally ose by ‘ote than 20% dig the Year, beling salt ‘feringlow ars. Indios lc shown steady to go against the pain Mbasiodcedanssporeounge se ‘ee again usta oa isa Norma? Maina, a avian expert, 5295 ict seraft ation the ages ay Inianaiine“Thathepsensancerevenies" AMoney Spinner ‘Tis however sony athe story. Annas byBtMapoan ee aitine’sbooksreveasthat \thindoedsaleand leseback uanactnsthat Inelped indo record higher profs In some aes, hese wansacns ted loses imo prot ‘asic tappened in fiscal 20 inancia doce ‘ents tat Inercloe ied wth he Minty of ‘Company Allatis ease (OCA) aloo show itesoen ar Vectastain i toes os Sony re uuserofsaleand- ts from is thud leaseback — on {financingamong. ile = the Three acount ‘no-frills carriers Sxpersthat ET Mag inthepasttwo Sine angrouhed Sthetnnactos yearstoMay1 ‘done by indiGo ad- free sco ‘nar and neo hem called hee acct Ingenses as financial enpeesingto die mere alueoufivesinet “The combiatonof operations performance and financial engineering har amped Ino “raion: Prom anal investment found {Hoo crore as equity expla by promoters, the Sine today ca be vale t 12.200 crore ($2 Tan) depending on “bow nesors wea the Vv sale and ease mode ys apa, CBO ‘capa Souda ndeed atlas ned indo decison to tually ple san reuteasapnble tot {act evestoritret and at onbounes In September, Chosh denied an sch plan, sayingthe rele wereannouncedtoendthe"b “Btreinterpetaton peopled oreo (rtwo shetsthatareleaked every yar whe Sco mate regula tory ing 301 Fromaninitial ‘vas et investmentof ——adahe ine mys around ieyontott™ wOdcroreas: aid nt she it equity capitalby alc sex oF promoters, unt th hee IndiGotodaycan sia. on wy i ‘diy chon ad hevaluedat — he instanton w2200crore tote ner and a “gave outdata from eto stmt ‘othe Daca aiatonreult elableModet Indio promote Rab thas toinssed hats alps vansparen Anjone teresedin ean ining indo’ inances re to approach the regulators held ET Noverbe. ‘Ghosh, ao the alin’ spokesman, id not ‘omiment onthe fnaces or tari: "We do ‘otalscuss any ofthese Meal ems inte pres hesald Nevertheles, the sale andeazeback model alps expan wy no reports consent rok eve competsor sre lg money and re ‘Salle wth mounting eset begs the (ges wy eartoter ans do esame? “Aa mary anes, logon, oT benefits eansacton ae sgicat (ee Saleand Leasback Node, Intel book Poundaionsof Aline nance Methodology And xywote that hanks tosieand leach, “Ue ‘UtiewleceNea cas aow ich thee ‘tse topay down te det associated wattheal ‘caf. ttesle value ester dante amountck ‘detcagantthearera he aie wileceve a threcacfow=| ‘ean company apres to chan arrange rent they wrote, cau ts provided with an eetand an established customer without ha ingtoty stead new strat bg tllgenerate: lesseincome om the ate ‘lex Woy, C20 ofS, pate jet com pany calfoa, sos ainesiate Usp ‘we about ath es anda the ther al “Some afine captaie thes leases and long term maintenance and some expense then ‘aye hex who wae eater COO at rounded infer Aine “ainnal del ale anesebackla pop” sie snong nol aie othe exit enders to kep balance sheets. Asef Sreowned by leo, aniline ano on the {deprecation ponson which ree pot Sntsmerta isl happens IniGohasbeen the most ave ser of sale and leaseback fnaneing aon > fs casers, according to Fighglobal a news Prac, jn Vash Ren Fleming and La Pac \ cover story ‘ue Keanu Tiss 07 DCEMBER 2228,2015 The Reclusive IndiGo Promoter = Binoy Prabhakar tart pe tart sal ght n 2005 rc ssed ts rvebook out of ne window a year before ach. Te arin shopped fo: 100 Altus a aft, amasiv ter Torany ane eave alone 2 ling one Ino ‘surg the deal beau the man agement of Ars the European ‘rt maar, was Seeing com Torte by the presence of Rakesh Cangual tthe heim. cangwal wialsasraus resus hemos eig and resident recent oarole singe ries ar promoter Way Mala Nel Mil ait 3 pice- ‘Jet CEO earths year owing to intrererce from promoter Kalanth Maran Kingfisher hasbeen grou fer more than a year and oiedet sin tural ‘Shak Lamba a former viceresdent of operations tna says arcaf order pat, Cangwal li down the paraneterson how the airline shove function. "Hels the visionary at indio, auiing thea int the macro lve" ini’ decision to stay the course with one {ype of lanes = the A205 = Which renders bevefisn terms of ma “aggart ating personel nd coats was Cangas raRT=S— SUK TMS BUMS plan an del lus Tanks to Gnas ‘Supevision sys th person familar with operations. Conga who earlier used vist nia crasionaly, snow almost permanent based in the US. Employes at rio say they rarely see him Melon profil t the pinto casting inset saree CGhesh says ts liu to fathom that Gangwal sa shareholder, ‘ing that the ane does nt everhave review meetings “1am atu for that”08 cover story 1 2228,2015, tranacton inthe pat wo east ay flowed ‘iin aera wihas uanetctoneand ion Alin Spice and Norwegian ih 28ench, shin aepet ‘batty dieencein Indias rae wast neo portethepurcse 0109 ascribes plan ‘sfonyatracton ofthat order ae, acorns Wumongous Order I: huge oder helps aioe o bing down the fag nde bans the buyer es balan istuefornot jut aries, tas people who byt fm PricewaterhouseCoopers (PwC) on aviation f Usingone typeof ition aircrafthelps | erin he order of $100 IniGokeep | sion Hor operations ‘Mak Marin founder simpleand eam otwarin consitig snd greatdiscounts eri siystewould ote mAs Surprised. if ndiG0 te Balled sdscount inex ess of 40% of the ist rie Hereconsthesticker pice fran ibs 20 Sea "ang one typeof srr eps indigo keep ope: Profit wihou ao nearly 40 year, which she cptaonea stove, Se Severson Sites ingonetpectaer-renlsnallunneroftsning ‘Hisnce weeniyncedtoran cur mean Ween ‘endear parimenoy wefaveto seeps aneout ‘Nelat minute fosmuntennce, eet Stas | hangabe~ alot ondearderevaangoundcewr se ‘Operational gas apart itines Ue ET rer Crete Uses feat ferrin andere cer siiiantadvantagesybuyingenetype ipa fom mnt Pana Gab, Nee on a host | Wg lnebusines ee The Recs nda Promote. aur eapitalies on the warranty ad param seameaente assets) ‘Sausessayea person faniiar with the adie’ op ‘lsc themandgvethem okie dscns “Forex ‘le, (uropeanaltinel Eyer, whichiscommitelto Al buslesoutmestiso Boing placed theigst orderi [Arto afer They pt them aarp ace. ‘mente they wentonoreael heplanes atl.” Evens, Easyjet was an exallshed sie, having stateixopertionin 95 IndKowasnocevenotthe ing ‘lcs talondjut10Dcrorelaound 20 lon rome money Yer lmanaged sue del fr 100 How dd inGo do? The cred goestoco founder ake Ganga a veteran feat 5 years he a fren Bag poet rots es operator sens Thee separate back back trnsactons ak pachne thetistto tale ceivery othe avert he met ‘Seca elt easing companies a $60 ie areal for ths making pro of $l and $35 iion Ihe thro az atk heme orca ‘Thelease ior fve ern ince How Indico wentaboutit rod pice) e Prec ony Fat Corio oe Lage crt sky pies hd cir fhesefinancaltens” ‘ Dealforastea! ‘The rales overtng aca oancing spa that a downpayment of nl for aren with rel at ingot AAA BBD, and? forthe ones wth lowest a ‘0, acondingto the Pw report, Ce este tothe srrftmaker fromthe proceeds ofthese {othe easing company) Theeans iota dant onbipriefor ‘Artur 30 wold tavehad to make down payment of {8sinlon Geetiow indica wen about or plac order forse. The company’s alancesbee then snows was wel pitalzed e357 ere (2 mi on tomeerthe payment schedule ‘accounting cat dt {ecsved fo manufactuers wi at mal cours of business But other formsof cata non cash payments from aircraft anafactrer can be Counted nfancaltatemente ser ieeng heron och ‘hrdfomiesrtan en 990 7 tePwC report The mambers tere Sent the nie leasing rasactons leasback tings $45 mlion prof totndie. And hs ate at wor ‘uly, the finances of IndiGo in the stan yars donot show any pret Aszune he cont around 45% 08 it ce ints average ce weld nav Fata pay ony terre to law anaes for 10 les Sach toons ae not ald at ‘neg vay cas te congsny had tecover story How IndiGo Boosts Profits In 2012-13, cash and non-cash incentives contributed £359 crore, or 45% of total profits Indico can't show the dacount receives rom, purchase ofsirert industry expertay soul be het bok profits when iselsnewly acquired at ‘raft easing companies. The ogi simple the Dice pid by easing companies fr plane always Digher than the eostpce ‘Tidy Prot (CaP esimaesthatiniGo makes pot ot 4 ‘lin fr every planes leasg copa thsasttsine amor savigotaround $50 ‘eae rentals The ene eet, baring planes, 5 wouldbe cal S4Stllonat coun for of expenses = wl ox proiablty (se ow nde Pref The Mghlobl report conti that indi makes $4Sollon fom sle and leaseback ofeach aera. ‘Wihanaverageae term offi and al years he {ine als ering om the requent renewal ok Is lee by aveding costly maintenance repalrs tt ‘reepinaltersiayears, accordigio de report ‘Mama the avaton expert sys returning arr 19 leat companies afer five ots years els. The portant, the D Check he most comprehen eklors plane) aprechesaroud hare Hs ‘ery expensive By recurring planes before he D ‘Checks, indiGomalerbgsarings "The only problem shat indico has never di theasst, the practice wouldbet reduce te costofac ‘quingthe aeraftin he alnce eet Buti indiGo's ee the alin aslesedtheaeraltandsoits prope ‘Sonate reducing trom he ease etal” ithe cain lao puctase s 1 price 30 millon thea reducingthecash nen {he Butin ndio'cse the craft sod wo easing firme andso late accounted ntebooks Andi {helene periods fr ve yer, tllon tat oe ‘thcancennes would reduced om esse rentasevery ear im inlGo’ cake, thls yearly component toulled £2627 crore fora leet o esr. Asaing 6 of ‘hemarelesethe standnan cashncemtve lone Amount o 37 crea plane yea. The amount of aig Inaidostrted Soa Glocerigthe _PeeiciStoah arontmofensh ae incentives only boosting profits bya third fremfecei20d Sierras isco Without directly refer ring IniGo, ami Rati, lobal head o account Ingadvisory services for KPMG, sys areraft man ‘counts for placing the bulk order. Typ now cash incentives given by manulaetrers ele ee {25 Indico iliely to have assigned a value to such ‘taretand cnuines. Another accounting expert sas, "If company owns Tie cence Toes, DECEMBER 2228 2013, sxc Incentives tat an be csmedin ute 1,380 trate, ort. crore per plane Long-term Gains Inge arte dices the gant fash al no «shincetesony focal 20 ihe finan oct ‘menssuboutedto Deca theregatrecenpanes. Prot 2 the company onde trees frets fom srraft makers and thee wre en ‘ted easereuals.“onemigtargetictismae ‘hipwahrentalsabeent-whichiseenthe cas ys Seacouningeperienceaten cath incentives te subtracted from lease ental He Saleand ase back transactions Under dhs, say ‘company makes prof of§5 lion fom sling a Plane but in etura eases the sume a renal higher {han the market ate, the excess Value haste te indice pays $400,000 as lease rentals armonth compared wit the marhat rate $350,000, the ex ‘ese $50,000 would be edaced fom fase eal Tour example, the excess would be $600,000 » {a of aircraft That meane ony $400,000 willbe teonsdered spot If lndio shows oly reduction in Jeaserentls and roi om ake ‘the entire profit from sale and Iesebaclsbengersedby hgh ‘ons et ba, Inco lai as ease rentals dops, boosting prs Secor ington be tm cout egatey Tne would be muct igher than other Ian Anes becaus ofthe order soe. “Tatis one key ‘eason why ini’ operational cst sch low ‘ethintocompeitor 09