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July 18, 2024

SpiceJet's first 737 MAX 8 takes-off from Boeing Field in Seattle, Washington (Craig Larson photo).

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SpiceJet promoter Ajay Singh is infusing Rs 5000 million (about $ 61 million) into SpiceJet by subscribing to fresh equity and/or convertible instruments. The announcement comes as the airline entered its 18th year of operations, starting commercial operations in May 2003—a promoter to pump in Rs 5000 million into SpiceJet.

Ajay Singh

With this fund infusion, the airline will be entitled to additional credit facilities of Rs 2060 million under the government’s Emergency Credit Line Guarantee Scheme (ECLGS), SpiceJet said in a statement.

The infusion of fresh capital will substantially strengthen the Company’s financial position and is a powerful vote of confidence in its future and long-term viability. The airline said it marks a pivotal moment in SpiceJet’s journey towards sustained growth and long-term success. The company’s board of directors met on Wednesday to discuss options for raising fresh capital for the company.

The Board deliberated on the matter and agreed to issue equity shares and/or convertible securities/equity share warrants on preferential basis to the Promoter and/or the Promoter Group of the Company, on preferential basis, in one or more tranches at an issue price to be determined in accordance with the Securities and Exchange Board of India’s Issue of Capital Disclosure Requirements Regulations for an amount of Rs 5000 million subject to the approval(s) of the shareholders of the Company, the Securities and Exchange Board of India and/or any other competent authorities and such other approvals, consent, etc. as may be required in this regard,” the airline’s statement says.

SpiceJet has a bright future and I am committed to helping it achieve its full potential. This investment will allow the airline to accelerate its growth plans and capture new opportunities in the market, grow its revenue and profits. We are committed to building a sustainable and profitable business, and this investment is a reflection of that commitment,” the statement quotes Singh as saying.

The airline is already utilizing $50 million ECLGS funds that it already received and its cash to revive its grounded aircraft. Two of the grounded aircraft, a Boeing 737 and a Q400, have been operationalized so far, and more planes are expected to re-join the fleet soon. The number of grounded aircraft is not immediately known.

The announcement of the fresh infusion of funds came on a day when the Press Trust of India (PTI), an Indian wire agency on the lines of Reuters, reported that the airline had been put under “enhanced surveillance” by the Directorate General of Civil Aviation (DGCA) due to it facing financial issues, something which the airline spokesperson “strongly denied.” The DGCA official, who was not named, said that the airline had been under “enhanced surveillance” for over three weeks.

The PTI report quotes the DGCA official as saying that the focus is to ensure that there is no potential adverse impact on flight operations and that there are no “cutting corners” on safety.

The airline has yet to declare its financial results for the financial year ending March 31. On June 29, the airline informed the Bombay Stock Exchange “that SpiceJet Limited (the “Company”) shall be declaring its financial results for the financial year ended March 31, 2023, in the coming weeks, and the intimation about the same shall be provided to the exchange in due course. Please note that the Company could not hold the meeting of Audit Committee and Board Members in the past for approval of financial results for financial year ended March 31, 2023 due to ongoing medical incapacitation of a key member of its Audit Committee,” the airline said in a statement to the stock exchange (ff50437e-bccf-4319-a4bd-5f635cba125d.pdf (bseindia.com)

The airline has had its share of ups and downs in the last year. On February 24 this year, the airline declared a net profit (excluding non-cash forex impact) of Rs 2210 million compared to 200 million in Q3 FY2022. The airline reported a net profit of Rs 1070 million (Rs 2210 million excluding forex adjustment) for the quarter ending December 31, 2022, as compared to a net profit of Rs 232.8 million (Rs 200 million excluding forex adjustment) in the quarter ending December 31, 2021. Despite a big jump in passenger traffic, business continued to be impacted by high fuel prices and the depreciating Rupee.

On February 27, the airline announced restructuring over $100 million in outstanding dues to Carlyle Aviation Partners into equity shares and compulsorily convertible debentures (CCDs). Aircraft lessor Carlyle Aviation Partners is the commercial aviation investment and servicing arm of Carlyle’s $143 billion Global Credit platform. “The transaction will wipe out over $100 million debt of SpiceJet, thereby strengthening its balance sheet for future expansion. The move will substantially deleverage the Company’s balance sheet,” the airline said.

The airline board approved issuing fresh equity shares of $29.5 million to Carlyle Aviation Partners at INR 48 per share, or the Securities and Exchange Board of India determined price, whichever is higher. Following this transaction, Carlyle Aviation Partners will have over 7.5 percent equity stake in the airline.

However, in May this year, at least three lessors — Wilmington Trust SP Services, Sabarmati Aviation Leasing, and Falgu Aviation Leasing —  sought the deregistration of one aircraft each, according to an update on the regulator’s website. The lessors sought deregistration of the aircraft a day after the National Company Law Tribunal (NCLT) issued a notice to SpiceJet on a petition filed by an aircraft lessor seeking initiation of insolvency resolution proceedings against it (Lessors seek to deregister three planes of SpiceJet – The Economic Times (indiatimes.com).

Incidentally, in August 2022, the airline announced that it had entered into a settlement agreement with aircraft lessor Goshawk Aviation Limited and its affiliated leasing entities Wilmington Trust SP Services (Dublin) Limited, Sabarmati Aviation Leasing Limited, and Falgu Aviation Leasing Limited related to two Boeing 737 MAX aircraft and one Boeing 737-800 NG aircraft.  The settlement allowed the entry into service of two more fuel-efficient Boeing 737 MAX aircraft into the SpiceJet fleet.

Goshawk Aviation Limited is one of the main lessors of MAX aircraft for SpiceJet. The settlement with Goshawk followed SpiceJet’s successful settlements with De Havilland Aircraft of Canada Limited, Credit Suisse, Boeing, CDB Aviation, BOC Aviation, and Avolon (News and Press Release | SpiceJet Airlines).

author avatar
Ashwini Phadnis
Former Senior Deputy Editor at Business Line (aka The Hindu Business Line)

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