Charter airline service firm Swajas Air Charters Ltd is in the market to raise Rs 37.5 crore ($8.4 million). It is not every day that an air transport firm goes public and given the recent re-entry of airline industry veteran Captain Gopinath in partnership with Tatas in the charter air service business and the existing presence of billionaire brothers Malvinder and Shivinder Singh through Religare Voyages, investors will be closely looking at how the public issue of Swajas fares.

Swajas started less than three years ago by acquiring the business of an aircraft brokerage proprietary concern incepted in the mid-90s by Swajas’ promoter and managing director R Jayakumar. It is into dry lease and wet lease of helicopters and aircraft of its own, largely operating in southern India. It caters to corporate travel and emergency medical services, and also provides solutions for aircraft management, maintenance and technical support.

Its revenues have grown from Rs 7.51 crore in fiscal 2008-09 to Rs 23.33 crore during the nine months ended December 31, 2010. Its EBITDA has increased from Rs 58.98 lakh to Rs 1.9 crore and profit-after-tax has increased from Rs 38.78 lakh to Rs 1.08 crore in the same period.

Swajas’ clients include Hardy Exploration & Production (India) Inc., government of Orissa, Videocon Industries, L&T, Nimbus Communications, Suzlon Energy, Apollo Hospitals Group and BALCO.

The company has an in-house fleet strength of three helicopters and one aircraft operating on a dry-lease basis. It is now looking to use the IPO money to part-finance the fleet expansion, fund the setting up of MRO/hangar facility at Chennai airport, finance the purchase of office building and meet the working capital requirements.

Industry & Peer Group

The closest peer of Swajas is Global Vectra Helicorp which went public in late 2006. Global Vectra closed FY’10 with revenue of Rs 24.5 crore with net profit of Rs 74.9 lakh. In the same period, Swajas had revenue of Rs 29.1 crore with net profit of Rs 78.5 lakh.

Given this parameter, Swajas is just a shade bigger than Global Vectra, but the latter has a market cap of just Rs 36 crore or $8 million. In contrast, Swajas appears to be asking for stiff valuations.

Given the difference in issued and authorised (which was changed this January) share capital of the firm and the last transaction at which fresh shares were issued to promoters, the issue price can be anywhere between Rs 100 to Rs 350 a share which will value the firm at least Rs 150 crore and as much as Rs 431 crore (a tad below $100 million). This looks fairly expensive. But then, Global Vectra has started clocking losses and revenue growth has also not been too exciting in the first three quarters of the fiscal ended March, 2011.

Swajas share issue will set a benchmark for future public floats or private equity valuations in the sector.

Besides Religare Voyages and Captain Gopinath-Tata venture, another firm operating in the segment is Airnetz, co-founded by Atul Khekade, who is also the founding partner of Netz Capital, a venture capital and advisory firm which is looking to invest $100 million in Indian infrastructure companies over the next two years.

As of January 31, 2011, a total of 127 companies are holding permits to operate as non-scheduled operators, as against 99 companies during 2008. Just over half of the market in air charter services is in the helicopter services, with the rest in charter aircraft services and a small proportion in hot air balloon.

Majority of helicopters serve the offshore oil & gas exploration industry and VIP charters, with the top names being Pawan Hans Helicopters (largest operator with a fleet of 44 helicopters), Deccan Charters (11 helicopters providing charter, VIP and offshore services) and Global Vectra Helicopters (25 helicopters mainly serving offshore industry).

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