Fly Hi directs 66.58% of IPO proceeds to working capital

Fly Hi plans to use Rs 24.2372 crore, or 66.58% of Rs 36.4026 crore in estimated net IPO proceeds, for working capital. The allocation is intended to finance the gap between credit offered to mid-sized and large enterprise clients and advance or limited-credit payments required by travel suppliers, including planned ticket and hotel pre-booking.

Why is Fly Hi directing IPO proceeds to working capital?

Fly Hi is directing its largest IPO allocation to working capital because its business model can require payment before corporate clients settle their travel bills. The company proposes Rs 24.2372 crore for working capital, compared with Rs 4 crore for partial borrowing repayment, Rs 1.80 crore for talent acquisition and Rs 6.3654 crore for general corporate purposes.

Fly Hi says mid-sized and large enterprises in India have been accustomed to obtaining credit from travel service providers, particularly offline travel agents. Suppliers, by contrast, typically seek advance payment or provide limited credit. The resulting funding requirement covers ticket bookings, money placed in wallets for instant payments, and settlement for travel facilities.

Fly Hi defines its working-capital requirement through total current assets less total current liabilities and provisions. The company says its historical needs were funded through equity investments and debt financing from banks and other financial institutions, while its Fiscal 2027 estimate introduces IPO proceeds as a separate funding source. The estimates are management assumptions and have not been appraised by a bank or financial institution.

How much is Fly Hi’s working-capital requirement expected to rise?

Fly Hi estimates that its total working-capital requirement will rise to Rs 47.04 crore in Fiscal 2027 from Rs 20.2641 crore in Fiscal 2026. Total current assets are projected to increase to Rs 59.20 crore from Rs 27.2237 crore, while current liabilities and provisions are expected to rise to Rs 12.16 crore from Rs 6.9596 crore.

The Fiscal 2027 funding plan assigns Rs 24.2372 crore to IPO proceeds, Rs 21.8152 crore to internal accruals and Rs 98.76 lakh to borrowings from banks, financial institutions, non-banking financial companies, bill discounting and related parties. In Fiscal 2026, the Rs 20.2641 crore requirement was funded by Rs 7.6314 crore of borrowings and Rs 12.6327 crore of internal accruals, with no IPO contribution.

The projected increase depends on completion of the offer and on the assumed operating balances being achieved. Fly Hi says that if net proceeds are insufficient or the estimated costs of its objects increase, it may use internal accruals, seek additional debt or use surplus funds from other stated objects, subject to applicable compliance requirements. The company also says that a variation in the use of net proceeds may require shareholder approval.

What does Fly Hi’s ticket and hotel pre-booking plan change?

Fly Hi’s ticket and hotel pre-booking plan introduces inventory into its Fiscal 2027 working-capital model for the first time. The company projects Rs 3.50 crore of inventory and 16 inventory days in Fiscal 2027, whereas inventory and inventory days were nil in Fiscal 2024, Fiscal 2025 and Fiscal 2026.

Fly Hi says that after the IPO it plans to purchase tickets and hotels in advance, especially near Republic Day, Christmas, Diwali and Dussehra. The company intends to use past client requirements to make these bookings and seek additional margins during peak travel periods. The plan therefore relies on client demand being sufficiently predictable and on the assumed 16-day inventory holding period being achieved.

The projected rise in current assets extends beyond inventory. Fly Hi forecasts short-term loans and advances of Rs 8.95 crore in Fiscal 2027, compared with Rs 95.24 lakh in Fiscal 2026, and other current assets of Rs 15 crore, compared with Rs 1.4846 crore. These categories, together with inventory, account for Rs 24.8176 crore of the projected Rs 31.9763 crore increase in total current assets.

Can Fly Hi reduce the cash gap created by client credit?

Fly Hi expects trade receivables to rise to Rs 31.75 crore in Fiscal 2027 from Rs 24.7867 crore in Fiscal 2026, while receivable days fall to 88 from 146. Trade receivable days are calculated as trade receivables divided by total sales and multiplied by 365. Fly Hi says clients normally take about 78 days to clear previous dues under its usual business practices.

The lower receivable-days forecast assumes Fiscal 2027 sales of Rs 132 crore, against Rs 62.0363 crore in Fiscal 2026. Receivables would still increase by Rs 6.9633 crore despite the lower day count. In Fiscal 2024 and Fiscal 2025, Fly Hi reported 78 receivable days in each year, with trade receivables of Rs 9.6166 crore and Rs 9.7291 crore, respectively.

Supplier credit provides only a partial offset in the Fiscal 2027 plan. Fly Hi projects trade payables of Rs 6.25 crore and payable days of 28, compared with Rs 2.9220 crore and 27 days in Fiscal 2026. The projected 88-day collection period would remain 60 days longer than the planned 28-day supplier payment period, maintaining the need to fund the interval between supplier settlement and client collection.

What controls apply to Fly Hi’s IPO proceeds?

Fly Hi says gross IPO proceeds will be transferred from escrow to a separate Special Bank Account upon listing, and a monitoring agency will monitor the account and its transactions. Payments for the stated objects and issuer expenses are to be made from that account, while transfers to Fly Hi require a go-ahead certificate from the monitoring agency.

The fresh issue is expected to generate Rs 42.4361 crore before estimated issue-related expenses of Rs 6.0335 crore, producing estimated net proceeds of Rs 36.4026 crore. The separate offer for sale is up to Rs 10.1959 crore, but Fly Hi will not receive those proceeds because they are payable to the promoter selling shareholder after the shareholder's issue-related expenses and applicable taxes.

Fly Hi has earmarked Rs 6.3654 crore for general corporate purposes, equal to 17.49% of net proceeds and 15% of gross fresh-issue proceeds. Under the Securities and Exchange Board of India Issue of Capital and Disclosure Requirements Regulations, general corporate purposes cannot exceed 15% of gross proceeds or Rs 10 crore, whichever is lower. Fly Hi says a move to a new object requires shareholder approval by special resolution before pending funds can be released for that approved use.

Conclusion

Fly Hi’s proposed use of IPO proceeds centres on financing the timing difference between corporate-client credit and supplier payment requirements. The Fiscal 2027 plan projects a Rs 47.04 crore working-capital requirement, with Rs 24.2372 crore from IPO proceeds supporting receivables, pre-booked travel inventory, advances and other current assets.

The disclosed Fiscal 2027 assumptions are the next measures to watch: receivable days are expected to decline from 146 to 88, inventory is planned at Rs 3.50 crore with a 16-day holding period, and payable days are projected at 28. Fly Hi also says it will revise the deployment schedule in accordance with applicable law if the offer is not completed in Fiscal 2027.