The board of low-cost carrier SpiceJet on December 12 approved the proposal to raise Rs 2,254 crore through the issue of up to 130 million convertible warrants and 320.8 million fresh equity shares at an issue price of Rs 50 each.
SpiceJet will issue convertible warrants to 64 allottees, including Prabhudas Lilladher Advisory Services, LKP Finance, Martina Developers, and Fincon. The issue price of Rs 50 is 18.4 percent lower than the SpiceJet stock price of Rs 61.3 when markets ended on December 11.
In the quarter ended September 2023, the airline shrank its net loss to Rs 431.54 crore from Rs 837.8 crore a year ago.
The announcement of its plans to raise funds and its financial results for the second quarter, the shares of the airline went down 9.7 percent from Rs 61.49 to Rs 55.5 on December 12.
SpiceJet’s market capitalisation stands at Rs 4,000 crore. Promoters, led by Singh, hold a 56.5 percent stake in the company, and, out of this, 37.9 percent is pledged with various lenders.
Also read: SpiceJet’s Q2 results will be old wine in a new bottle, what holds ahead?
Cash crunch
The budget carrier has run dry on cash as it grapples with a number of legal cases over non-payment of dues, involving its former promoters as well as aircraft lessors. In July, the company said that Singh would infuse Rs 500 crore in lieu of fresh equity shares or convertible instruments or both.
The improving profitability of India’s aviation sector, coupled with the bankruptcy-led exit of Wadia Group’s budget carrier GoFirst, has improved SpiceJet’s prospects to repay debt and manage finances.
In August 2023, SpiceJet raised its market share narrowly, beating Akasa Air, which saw an overall jump in passenger traffic by 30 percent over last year.
Also read: SpiceJet shares fly 7% higher on airline's plans to list on NSE soon
Cash infusion
Singh pumped Rs 500 crore into the company in August. "I firmly believe in the potential of our airline, and I am pleased to have contributed to its growth by infusing Rs 500 crore into the company. This infusion will help bolster our efforts to revive our grounded planes, for which we have been working tirelessly, strengthening our fleet and expanding our cargo operations," he had said in a press release.
The cash-starved airline has only a part of its fleet operational with poor one-time performance from nearly 40-45 percent flight delays everyday.
Market experts say that SpiceJet had a large number of denied boarding as the airline overbooked many flights, or cancelled and combined flights which led to overbooking.
According to data from the Directorate-General of Civil Aviation (DGCA), between May 2023 and October 2023, 189,634 passengers were affected by delays of beyond two hours on SpiceJet's flights. The airline paid Rs 3.78 crore in compensation to the passengers in this period.
During the same period, SpiceJet wrongly denied boarding to 991 passengers and paid Rs 18.11 lakh in damages. Similarly, around 16,131 passengers were affected by flight cancellations and the airline paid Rs 1.33 crore as compensation.
Despite all the headwinds, the airline's stock zoomed around 70 percent in the past six months.
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