SpiceJet Secures INR 22.5 Billion Funding to Tackle Quarterly Losses and Revive Operations

In response to financial challenges, SpiceJet (SG, Delhi International) is set to raise INR 22.5 billion (USD 270 million) through the issuance of preferential shares and warrants. The decision, approved by the airline’s board of directors on December 12, aims to address debts, reactivate grounded aircraft, and fortify SpiceJet’s financial position.

According to a filing with the Bombay Stock Exchange (BSE), SpiceJet plans to issue over 320 million equity shares at INR 50 each (USD 0.6) and 130 million convertible warrants at the same price. Notable proposed allottees include the Nexus Global Fund, Elara India Opportunities Fund Limited, and Aries Opportunities Fund Limited, among others.

SpiceJet Managing Director Ajay Singh highlighted the significance of the fundraise, 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.”

The capital infusion marks SpiceJet’s third fundraising effort this year, and based on current expenses, it is expected to cover the airline’s operating costs for approximately three months. Facing legal actions from lessors, creditors, and former majority owner Kalanithi Maran over debts and arrears, SpiceJet is navigating a challenging financial landscape. In November, the airline’s legal representative informed the Delhi High Court that the carrier was “struggling to stay afloat.”

SpiceJet’s fleet currently comprises 34 active aircraft, 23 inactive aircraft, and ten wet-leased aircraft, a significant reduction from its fleet size earlier this year. The airline has faced difficulties adhering to reactivation timelines despite announcing several reactivation programs. As a result, SpiceJet’s local market share has declined from 7.3% in the fourth quarter of 2022 to 5.4% currently.

Concurrently with the funding announcement, SpiceJet released its financials for the quarter ending September 30, 2023. Despite reporting three consecutive quarterly profits, the airline posted a net quarterly loss of INR 4.32 billion (USD 51.8 million) against revenues of INR 14.3 billion (USD 171.5 million) and costs of INR 21.6 billion (USD 259 million). Cumulatively, SpiceJet has incurred losses of approximately INR 55 billion (USD 659.5 million) over the past five years.

“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,” said Singh. “The airline continues to explore avenues for growth and profitability in the evolving market, and the fresh infusion of over INR 22 billion in the company will bring renewed energy to adapt to the changing circumstances.”

In addition to the funding news, there are reports suggesting that SpiceJet is considering listing its shares on India’s National Stock Exchange (NSE). The airline currently trades on the BSE, with a market capitalization of INR 39.7 billion rupees (USD 476 million).