SpiceJet Promoter to Divest 10% Stake in Effort to Raise Funds

SpiceJet’s managing director and primary promoter is poised to sell a 10% share of his stake in the airline, aiming to generate approximately INR 30 billion (USD 357 million) to sustain the airline’s operations, reports The Economic Times. Currently, the promoter, along with his family and related entities, holds a significant 47.8% share in SpiceJet.

The potential sale, targeted for completion by September, would reduce his holding to between 30-35%, though he would retain his position as the largest individual shareholder. Later this year, the managing director plans to boost his stake by approximately 9% through the conversion of INR 3 billion (USD 35.7 million) in warrants into shares.

This financial maneuver comes amid ongoing challenges for the airline. On August 8, 2024, an internal communication to pilots indicated that their June salaries would be delayed, as the airline sought short-term bridging finance for operational costs. Despite these struggles, SpiceJet reported a consolidated net profit of INR 1.58 billion (USD 18.8 million) for the first quarter of 2024, marking a 26.7% decrease from the previous year, primarily due to reduced flight operations and a shrinking revenue stream.

Previously, the airline had embarked on a fundraising initiative approved by both the board and Indian regulators, targeting INR 22 billion (USD 262 million). However, after raising only INR 10.06 billion (USD 119.8 million) due to a key investor’s withdrawal, the board recently approved a renewed effort to raise another INR 30 billion through institutional placements.

In a related legal challenge, the Delhi High Court has mandated that SpiceJet return three leased engines by August 17, following unsuccessful attempts to negotiate lease arrears with the lessors, Team France 01 SAS and Sunbird France 02 SAS. The court’s decision highlighted SpiceJet’s financial difficulties and contractual breaches, emphasizing the airline’s legal obligation to meet its lease payments as per the terms agreed on May 29, 2024.

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