InterGlobe Aviation Shares surge on board approval for a financial services arm in Gujarat

On September 4, the board of InterGlobe Aviation Ltd, which operates India’s largest airline IndiGo, authorised the establishment of financial services arms with an initial investment of Rs 30 crore. In a report to the markets, the business stated that the Board of Directors approved the formation of a Private Limited business with an initial investment of Rs 30 crore.

The airline’s board of directors has authorised the investment, which would be established in the Special Economic Zone at Gujarat International Finance Tec-City, according to a stock exchange filing. Furthermore, the airline’s board of directors has authorised the issuance of corporate guarantees in the amount of up to USD 996 million to protect the payment obligations of the aforementioned wholly-owned subsidiary.

While the airline did not identify the name or role of the new arm, it did state that the subsidiary would be involved in the financing of aviation assets. IndiGo’s move comes only days after Air India became the first major airline to establish a leasing operation at Gujarat’s IFSC Gift City.

In an effort to encourage aircraft leasing from GIFT City, the government exempted aircraft leasing businesses from paying corporation and withholding tax on leasing transactions last year. The exemptions are part of the government’s ambitions to turn the country into a global aircraft leasing centre comparable to Dublin or Singapore by incentivizing foreign lessors to start operations from GIFT City.

Currently, Ireland and China account for the vast majority of global aircraft leasing. India hopes to obtain a chunk of it through the IFSC. In February 2021, the International Financial Services Centre Authority (IFSCA) authorised a framework for aeroplane leasing in India.

Taking lessons from Dublin, IFSC Gift City offers various advantages, including tax breaks on company profits for ten years, no capital gains tax, no stamp duty, and no GST on transactions conducted via the corporation, among others. For the last two and a half years, the government has been attempting to attract aviation players to set up shop in Gift City.

At present, InterGlobe Aviation shares are trading at Rs 2472.20 on the NSE today, up Rs 20.25 or 0.83% from the previous close of Rs 2451.95. The stock opened at Rs 2475.05 and touched a high of Rs 2489.35 during the day. The low for the day was Rs 2463.35.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.