Spicejet looking for a “knight in shining armour” to help with financial distress

Financially troubled Indian carrier SpiceJet Ltd. is open to investment from external parties, including other airlines, as it seeks to raise INR 2000 crore (USD 250 million), Chairman Ajay Singh told reporters in New Delhi on Tuesday, August 23.

Mr Singh declined to say what other carriers SpiceJet may be in discussions with but indicated an equity stake sale may be one option.

The shareholders of SpiceJet, which is a listed company, have approved fundraising of INR 1,500 to INR 2,000 crore, and some of the amounts have already been raised, Mr Singh said.

SPICEJET
Spicejet looking for a “knight in shining armour” to help with financial distress

ALSO READ – SpiceJet in active discussion with a Middle Eastern carrier for a possible stake sale

The airline had earlier this month said it was “in discussions with various investors (including a Middle East carrier and an Indian conglomerate) to secure sustainable financing.”

SpiceJet’s financial health worsened after Covid decimated air travel globally. The airline has suffered three straight years of losses while its market share has plunged to fifth from second largest.

In late 2021, the airline had cash and cash equivalents of just INR 72.9 crore compared with total debt of INR 9,750 crore. 

ALSO READ – Amidst ongoing court cases, SpiceJet posts net profit for Q3

SPICEJET
The shareholders of SpiceJet, which is a listed company, have approved fundraising of INR 1,500 to INR 2,000 crore, and some of the amounts have already been raised.

In the October-December quarter of FY22, the airline had reported a net profit of INR 23.28 crore, as against a loss of INR 57 crore in the corresponding quarter of the previous fiscal. The revenue climbed to INR 2,259 crore, marking a jump of 34% as against INR 1,686 crore clocked in the preceding quarter.

ALSO READ – DGCA orders SpiceJet to operate only 50% of approved flights

In addition to a deteriorating balance sheet, SpiceJet is under scrutiny from authorities for reporting several mid-air malfunctions. The incidents have prompted India’s aviation regulator to restrict the number of seats SpiceJet can sell at 50% for eight weeks.

The budget carrier is also tapping a government program that extends emergency credit lines to businesses hit by the pandemic, Singh said.

In 2015, Ajay Singh said the airline had been approached by foreign carriers seeking to purchase a stake.

ALSO READ – Cash-strapped SpiceJet plans to take delivery of 7 Boeing 737 Max

The no-frills airline currently has 60 operational aircraft and is also expecting Boeing to resume delivery of the 737 Max aircraft in October. The company will also raise capital via the sale and leaseback of at least seven additional Boeing Co. 737 Max aircraft this year, he said. 

“SpiceJet is doing its utmost to work through the stress we have faced,” Mr Singh said. “We will do everything in our power to make sure SpiceJet remains a strong player.”

It’s not the first time SpiceJet has flagged third-party interest. In 2019, Mr Singh said SpiceJet had received several proposals to buy into the company but was only willing to evaluate those that were strategic. And in 2015, Ajay Singh said the airline had been approached by foreign carriers seeking to purchase a stake.

In late 2021, the airline had cash and cash equivalents of just INR 72.9 crore compared with total debt of INR 9,750 crore. 

Meanwhile, SpiceJet has also been trying to monetise its freighter business, SpiceXpress. People aware of the development said that while shareholders had approved the plan, the airline was yet to receive clearance from creditors to separate the business.

Recently, three Indian banks internally categorised loans to SpiceJet as being at “high risk” though the airline has not defaulted.

IDFC First Bank, Yes Bank and Indian Bank are concerned about SpiceJet’s cash flows and have held talks with the carrier seeking assurances as it has been behind on payments to some aircraft lessors. 

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SpiceJet has also applied for INR 280 crore loans under the Emergency Credit Line Guarantee Scheme.

Singh holds around 60% of the airline, of which 44.24% is pledged with lenders. Based on its Tuesday, August 23 closing share price of INR 46.25 on the BSE, SpiceJet’s market cap was INR 2,783 crore.

SpiceJet has also applied for INR 280 crore loans under the Emergency Credit Line Guarantee Scheme.

The SpiceJet board is scheduled to meet on August 31 to consider and approve the financial results for the fourth quarter of FY22 and the first quarter of this fiscal, according to a regulatory filing.

“This is to inform you that meeting of the board of directors of the company will be held on Wednesday, the 31st day of August, 2022, inter-alia, to consider and approve: The audited standalone and consolidated financial results of the Company for the fourth quarter and financial year ended March 31, 2022; and the unaudited standalone and consolidated financial results for the first quarter ended June 30, 2022.

The trading window for dealing in securities of the company shall remain closed for the designated persons till September 2, 2022, in view of the declaration of quarterly results.”

SpiceJet to Stock Exchanges

ALSO READ – SpiceJet under attack by ransomware; morning flights affected

SpiceJet has drawn questions over the inordinate delay in the release of Q4 FY22 results. The company had, on May 27, said a ransomware attack on IT systems has affected its audit process, and due to this, the results have been delayed.

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