Pawan Hans may come with its IPO enabling itself to fly higher and safer

Country's largest helicopter operator Pawan Hans (PHL) declared a dividend of Rs 7.76 crores for the year 2014-15. The company got incorporated in 1985 with the primary objective of providing helicopter support services to the oil sector for its off-shore exploration operations, services in remote and hilly areas and charter services for promotion of tourism. In the paid up share capital of the company of Rs.245.62 crores, the President of India through Ministry of Civil Aviation holds Rs.125.266 crores( 51 per cent) and ONGC holds. Rs.120.35 crores (49 per cent). The Minister for Civil Aviation P. Ashok Gajapathi Raju received a cheque of Rs.3,95,84,735/- from Dr. B.P. Sharma, Chief Managing Director, PHL, as a dividend. A cheque of Rs. 3, 80, 15,265 has also been paid to ONGC.

Pawan Hans is a Mini Ratna-I category PSU and is India’s largest helicopter operator as also one of the Asia’s biggest operators. The operating and maintenance standards of PHL are one of the highest in the world. Rating of the Company has also been upgraded with stable India A+ from Stable India A. This has been possible with better financial performance.

On financial front, the company has been making profit since 1992 and has paid Rs. 223.69 crores dividend as on 2014-15. For the financial year 2014-15 PHL’s operating revenue increased to Rs.538.15 crores from Rs.529.57 crores in the previous year an increase of 1.62 per cent YoY. The net operating profit for 2014-15 is Rs.79.13 crores against Rs.73.03 crores in the year 2013-14 an increase of 8.35 per cent. This year the company has managed to turn around with net profit after tax of Rs.38.81 crores against Rs.38.57 crores during previous year an increase of 0.62 per cent YoY and has declared dividend at 20 per cent of the net profit after tax i.e. Rs.38.81 crores to Govt. of India and ONGC.

PHL has prepared Strategic Business Plan 2020 which envisages industry trends, future challenges and growth opportunities of General Aviation sector in India particularly helicopters, Seaplanes, Small Fixed Wing Aircraft and development of Heliports. Fleet acquisition under options of leasing and procurement routes through which 20 new helicopters in various categories like light, medium and heavy and 2 seaplanes will be procured. It is also planning to venture into MRO business. To start with the MRO facility is being planned to be established at Rohini at Delhi and Juhu at Mumbai through PPP model/ develop, manage and operate revenue based model. 

It is now reviewing prospects for an IPO with SBI Capital. The plan to divest equity stake seems to have been delayed by bureaucratic processes and involvement of multiple agencies. The government had already listed the company as a divestment candidate in its draft civil aviation policy. It is far behind with the IPO listing process. The company needs to secure approvals from petroleum and finance ministries before it can get listed on stock exchanges. It is noteworthy that PHL is a profitable company but has been marred in some controversies regarding loans taken from the government.

PHL, which operates a fleet of 46 helicopters, took a loan of Rs 131 crore from the government in 1986 which resulted in accumulated interest of Rs 329 crore until 2001 when the government decided to not charge any more interest. Since Rs 329 crore is substantial amount for a company that earned a profit of Rs 38.6 crore in FY 2013-14 on top line of Rs 529.9 crore, it has potential of impacting valuations of PHL.

The money raised through IPO can help the company to reduce the interest and debt burden. It will also help in increasing its footprint in strategic business plan 2020 and MRO business. Further, as decreasing oil prices will reduce the profit margins of ONGC. The intake from selling stakes in PHL will help the company in its difficult times.