GURUGRAM- Indian low-cost carrier SpiceJet (SG) is set to initiate talks with Boeing to recommence the introduction of new 737 MAX aircraft, for which the airline has an order of over 200 units.
Cash-strapped airline have received a lifeline as a group of funds and high net-worth individuals commit to investing Rs 2,254 crore through the issuance of up to 130 million convertible warrants and 320.8 million fresh equity shares.
This fundraising effort involves 64 investors, including funds such as Elara India Opportunities Fund, Aries Opportunities Fund, Prabhudas Lilladher, Nexus Global, and Mumbai-based businessman Harihara Mahapatra, along with Arjun Juneja of Mankind Pharma.
The shares will be issued at Rs 50 per share, whereas the airline’s shares were trading at Rs 58.04 at the close of market hours on Tuesday.
“The aviation industry in India is experiencing robust growth, with phenomenal traffic expansion. An infusion of substantial funds at this juncture not only has the potential to revitalize the airline but also facilitates the augmentation of its market share. SpiceJet’s need for new aircraft and the upgrade of its existing fleet can lead to increased revenue and reduced costs. These possibilities are now within reach, with every new plane available from Boeing and each aircraft contributing to sale and leaseback income, thereby enhancing liquidity.”Amisha Vora, Chairperson & MD of Prabhudas Liladher group.
SpiceJet’s promoter, Ajay Singh, currently holding a 56.5% stake in the company, has 37.9% of this stake pledged with various banks. Post the transaction, Singh will remain the largest stakeholder with a 45% stake, and there will be no change.
“The proposed capital injection will significantly contribute to expanding SpiceJet’s product presence and market reach, establishing a solid financial foundation. The raised capital will play a crucial role in supporting operational expansion initiatives, including fleet enhancement, route network expansion, and technological advancements,” affirmed the airline.
SpiceJet Boeing 737 MAX Talks
Singh mentioned that the investment will enable the airline to introduce new capacity and alleviate liabilities, consequently lowering the cost of capital.
He stated, “It helps us to bring in new capacity and settle some liabilities we incurred during Covid. This will also instill confidence in lessors and vendors.” He added that the capital infusion will position the airline comfortably.
SpiceJet has been sourcing capital from its partners at a high cost. Additionally, the airline has outstanding statutory dues, including TDS and other taxes, leading to accruing interest.
Ajay Singh mentioned, “This fundraising will enable us to settle these dues, significantly alleviating the interest burden.”
Sources indicate that SpiceJet has a short-term liability of Rs 6000 crore, with a major portion attributed to statutory dues of Rs 550 crore and a lessor liability of approximately Rs 4,200 crore. Singh further stated that the equity infusion will aid in additional restructuring.
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