SpiceJet’s Ajay Singh to Dilute Stake by Over 10%: Raising ₹3,000 Crore for Cash-Strapped Airline’s Revival

SpiceJet’s promoter, Ajay Singh, plans to sell more than 10% of his shares in the financially troubled airline to raise around ₹3,000 crore. Despite this dilution, Singh will still be the largest shareholder, holding about 30-35% of the company after the fundraising, which is expected to finish by September.

The airline aims to increase its capital by issuing new shares to investors. Currently, Singh and his family own 47.8% of SpiceJet, with 38.8% of those shares pledged to lenders. By the end of this year, Singh’s stake will increase by 9% after he converts some warrants into shares, worth about ₹300 crore. ICICI Securities and JM Financial are managing the fundraising process.

Previous Fundraising Efforts and Challenges

Previously, SpiceJet planned to raise ₹2,250 crore from 64 investors but only managed to secure ₹1,060 crore when one major investor withdrew. The airline is in urgent need of funds to sustain its operations and has faced challenges in raising capital. It has defaulted on payments to vendors, including aircraft lessors, leading some to seek bankruptcy declarations against the airline.

Currently, SpiceJet’s market share has dropped below 4%, with only 22 planes in service due to a lack of engines and spare parts. On Tuesday, SpiceJet’s shares fell nearly 9% to ₹56.4 on the BSE due to fresh concerns about its financial health.

Optimism Amid Challenges

An airline official expressed optimism about attracting investors, citing strong demand for air travel in India and SpiceJet’s low-cost structure as key advantages. The airline has struggled with salary payments and has recently defaulted on provident fund contributions, but claims that 95% of its staff have been paid “in phases.”

As of March 31, 2023, SpiceJet’s total liabilities were around ₹9,000 crore, including ₹2,700 crore owed to aircraft lessors. The airline had received shareholder approval to raise ₹2,500 crore through a Qualified Institutional Placement (QIP) last September, but the process stalled due to the resurgence of Covid, which further impacted the aviation industry.

Overcoming Industry Hurdles

Ajay Singh highlighted several challenges faced by SpiceJet, including halted deliveries of Boeing 737 Max planes, the impact of Covid, and a subsequent spike in jet fuel prices. Unlike other airlines, SpiceJet was also unable to benefit from the sale and leaseback of aircraft.