SEBI Blocks Elara Fund’s SpiceJet Warrant-to-Share Move

India’s Securities and Exchange Board (SEBI) has blocked the Mauritius-based Elara India Opportunities Fund from converting INR4.16 billion (USD48.7 million) worth of SpiceJet warrants into equity shares due to non-compliance with beneficial ownership disclosure norms, according to Moneycontrol.

The fund lost its SEBI-issued foreign portfolio investor (FPI) licence in March 2024 after failing to disclose details about its ultimate beneficial owners, a regulatory requirement for all FPIs. As a result, SEBI has denied Elara’s request to convert its warrants, which it had acquired in January 2024.

The initial deal saw Elara agree to purchase 83.3 million warrants at INR50 (USD0.59) each, paying 30% upfront and the remaining 70% upon conversion. At present, SpiceJet shares are trading slightly above the agreed price, around INR51.

Elara, managed by Mumbai-based Elara Capital, invests in transportation, travel, and hospitality sectors. The fund has appealed to SEBI for an exemption, arguing it wishes to divest its SpiceJet holdings through open market sales. SEBI rejected the request, prompting the fund to escalate the matter to India’s Securities Appellate Tribunal (SAT). Elara contends the warrants are “practically worthless” if not convertible.

A ruling against the fund would force it to write off its initial INR1.25 billion (USD14.6 million) deposit, while SpiceJet would miss out on the anticipated INR2.91 billion (USD34 million) in conversion funds. The Elara deal was part of SpiceJet’s broader INR7.44 billion (USD87 million) capital raise, which fell short of target. However, the airline later secured INR30 billion (USD351 million) through a successful qualified institutional placement.

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Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com