Flying The Coop

With the government’s strategic disinvestment of Pawan Hans (PHL) in limbo, Oil and Natural Gas Corporation (ONGC) might have just found the way out. It has decided to exit the joint venture with Ministry of Civil Aviation and sell its 49% stake in PHL to reduce debt and focus on its core business.

PHL depends on ONGC for 40-45% of its revenue, with the rest flowing in from flying state government officials and one-time charters. PHL’s dependence on ONGC may seem high but it is hardly the other way around. Out of the 22 helicopters deployed by ONGC, seven are chartered from PHL, with Global Vectra and Heligo Charters accounting for the rest. PHL’s frequent crashes have kept it in the news for all the all wrong reasons. There have been 14 accidents involving PHL choppers since 2010. That might have played a role in ONGC reducing its dependence on its own chopper operator.

Its patchy safety record does not make it an ugly duckling though. The sale of PHL is a great opportunity for those wanting to buy into the regulated helicopter services market. PHL is the industry leader and operates with a fleet of 46 helicopters, ahead of competitors such as Global Vectra, Heligo Charters and Himalayan Heli who have 23, 11 and five helicopters respectively. The company provides services for onshore and offshore operations, inter-island connectivity, disaster management and rescue work, heli tourism etc. and has a diverse range of light, medium and heavy helicopters apart from sea planes.

PHL clocked revenue of Rs.5.07 billion and net profit of Rs.2.43 billion in FY17. The eye-popping profit was a function of a Rs.3.4 billion write-back after the government waived off interest due on earlier loans taken for fleet acquisition. In FY16, revenue and profit was Rs.4.92 billion and Rs.571 million respectively. FY19 could also turn out to be a blockbuster year given the upcoming state and central elections.

Now, that it is up for outright sale, its market leader status in a heavily regulated industry could attract many bidders. The past half-baked attempts to sell 51% failed to generate a substantial response. The first round initiated in October, 2017 attracted only two offers — from Global Vectra and the US-based Continental Helicopters. The second round initiated in April, 2018 got around half a dozen bidders. It could well be a case of third time lucky for PHL.