SpiceJet, the low-cost air carrier, on Thursday got its shareholders' approval to issue additional equity shares to promoter Kalanithi Maran, who in turn will infuse Rs 130 crore (Rs 1.3 billion) into the airline. Maran's equity holding would go up from 38 per cent to 43 per cent of the company's shares.
At the sidelines of its annual general meeting, Neil Raymond Mills, chief executive officer, said: "He (Maran) will be paying 50 per cent more compared to the price quoted in the market. He could have saved Rs 50 crore by buying these shares from the open market, but he was ready to pay the premium, which shows the confidence of the promoter in the airline."
The shares were trading at Rs 22 each on the Bombay Stock Exchange on Thursday, down by 2.65 per cent from yesterday's close.
The fresh shares will be issued by the first week of next month. Mills said the money would help in covering losses, as well as fund expansion.
A senior official from the airline said Canada's export finance agency, Export Development Canada, is funding SpiceJet's purchase of planes and had sanctioned $270 million of credit for this, 85 per cent of the total value for the 11 Q400 turboprop aircraft the company has planned to add by the end of March 2012.
The remaining 15 per cent will be funded through the promoter's money and internal accrual.
The airline has 34 planes at present, 30 Boeing and four Q400s. It plans to add another 11 of Q400s
Earlier, Mill had said the airline was planning to invest around $500 million to acquire these aircraft.
In November 2010, the board of directors had approved an order of up to 30 aircraft, with deliveries from the second quarter of 2011.
SpiceJet is betting on Q400s with a vision of enhancing connectivity between Tier-II and III towns. By most economic projections, India will have sustained economic growth, fuelling a spurt in the middle class urban population.
The company believes secondary and tertiary markets would lead the growth. The Q400 makes it possible to access these 50-60 markets, as these cannot be served by larger jets, due to infrastructure constraints.
Mill said with these planes, the airline could manage to convert some rail passengers to use SpiceJet. Also, payback would be quicker.
The airline would be able to add one additional sector per day per aircraft. "If the aircraft's load factor (percentage of filed seats) is 75 per cent, it will break even and give reasonable margin," he said.
On international expansion, he said SpiceJet had approached the regulator to be allowed to fly on 10 sectors, including to CIS countries and Southeast Asia.
Spicejet on Thursday got its shareholders' nod to appoint Kalanithi Maran, Kavery Kalanithi, J Ravindran, Nicholas Martin Paul (who is the CEO fo the Airline) and M K Harinarayanan as directors of the company.