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SpiceJet to raise Rs 335 cr, strategic sale possible

By Mihir Mishra
April 21, 2010 02:33 IST
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Low-cost air carrier SpiceJet is looking at ways to raise around $75 million (Rs 335 crore). The airline has given the mandate to IDFC-SSKI for raising funds through preferential allotment of shares and strategic sale. "IDFC-SSKI is working on it and the money will be raised through both preferential allotment of shares and strategic sale," said a Mumbai-based investment banker, who is associated in this deal.

The airline has its board's approval to raise $50-75 million to fund its international expansion. Mails sent to the airline and its chief executive officer, Sanjay Agarwal, got no response.The airline has said it will begin flying abroad from June, with flights to Kathmandu in Nepal, Dhaka in Bangladesh and Colombo in Sri Lanka.

The New Delhi-registered airline operates over 127 daily flights and had a market share of 11.9 per cent in the last quarter, the second-largest low-cost carrier in these terms, with a fleet of 20 aircraft. It plans to add four aircraft this financial year.

A Mumbai-based aviation analyst felt preferential allotment of shares was not a good idea for a growing airline like SpiceJet. "In preferential allotment, one cannot sell the shares for a year and that will not be preferred by many of the beneficiaries," the analyst said.

The analyst adds that a strategic sale makes sense because SpiceJet needs a strong promoter. Their current promoters, the Kansagara family, own only 12.89 per cent in the airline. Foreign institutional investors own 9.35 per cent and various other entities own lesser shares. The public shareholding is about 47 per cent.

SpiceJet had a profit of Rs 108.9 crore in the third quarter ended December 31, 2009, from losses of Rs 17.96 crore during the same period last year. The airline registered 36 per cent growth in income from operations to Rs 642 crore, from Rs 472 crore during the same period last year.

Religare, the Anil Dhirubhai Ambani Group and Sun TV promoter Kalanithi Maran have been trying to buy the stake put in by hedge fund investor W L Ross India. Ross invested $68 million in SpiceJet through Foreign Currency Convertible Bonds (FCCBs) and has two options. It could convert FCCBs into shares at a price of Rs 35 a share by November, which will give it around 30 per cent stake.

The second option is to redeem FCCBs at a premium of 40 per cent, which means the airline will pay around $95 million (around Rs 450 crore).

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Mihir Mishra in New Delhi
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