SpiceJet, one of India's leading low-cost carriers, has announced its plans to raise INR22.5 billion rupees (USD270 million) in order to address its debts and reactivate its aircraft. The decision was made during a board of directors meeting held on December 12, 2023. To facilitate this capital raising, SpiceJet will be issuing preferential shares and warrants.
Capital Raising Details
According to a filing with the Bombay Stock Exchange (BSE) on the same day, SpiceJet will issue over 320 million equity shares at a price of INR50 each (USD0.6), along with 130 million convertible warrants at the same price. The filing also listed 64 proposed allottees, which includes entities such as the Nexus Global Fund, Elara India Opportunities Fund Limited, and Aries Opportunities Fund Limited.
Significance of Fund Raise
SpiceJet's Managing Director, Ajay Singh, emphasized the significance of this fund raise, stating, "This is a significant fund raise and it is designed to strengthen SpiceJet’s financial position, enhance operational capabilities, settle outstanding issues and position the airline again for sustained growth."
Previous Capital Raising Initiatives
This capital raising marks SpiceJet's third such initiative this year. Based on current expenses, it is estimated that the funds raised will cover the airline's operating costs for approximately three months.
Legal Challenges Faced by SpiceJet
SpiceJet has been facing legal challenges from multiple lessors, creditors, and its former majority owner, Kalanithi Maran, regarding debts and arrears. In fact, in November, the airline's legal representative informed the Delhi High Court that SpiceJet was "struggling to stay afloat."
Current Fleet Status
At present, SpiceJet's fleet consists of 34 active aircraft, 23 inactive aircraft, and ten wet-leased aircraft. This is a significant reduction from earlier this year when the airline had over 90 aircraft in its fleet.
Despite announcing various reactivation programs, SpiceJet has faced difficulties in adhering to reactivation timelines. As a result, the airline's market share in the local aviation industry has declined from 7.3% in the fourth quarter of 2022 to 5.4% currently.
Financial Results for Q3 2023
In addition to announcing the capital raising, SpiceJet also released its financial results for the three months ending September 30, 2023. After reporting three consecutive quarterly profits, the airline experienced a net quarterly loss of INR4.32 billion (USD51.8 million) against revenues of INR14.3 billion (USD171.5 million) and costs of INR21.6 billion (USD259 million). Over the past five years, SpiceJet has incurred total losses of approximately INR55 billion (USD659.5 million).
Plans for Growth and Profitability
"The July-September quarter has historically been a challenging period for the aviation industry. This year, the challenges were further compounded by elevated fuel prices, impacting operational costs," explained Singh. "The airline continues to explore avenues for growth and profitability in the evolving market, and the fresh infusion of over INR22 billion in the company will bring renewed energy to adapt to the changing circumstances."
Listing on National Stock Exchange (NSE)
In other news, there have been reports suggesting that SpiceJet intends to list its shares on India's National Stock Exchange (NSE). As of now, the airline is traded on the BSE with a market capitalization of INR39.7 billion rupees (USD476 million).
Summary
Overall, SpiceJet's decision to raise capital will play a crucial role in addressing its debts and reactivating its aircraft. With a renewed focus on strengthening its financial position and enhancing operational capabilities, SpiceJet aims to position itself for sustained growth in the dynamic aviation industry.
(This article is sourced from ch-aviation.com and curated by Thetransporteronline24)
