SpiceJet promoters to raise stake by 10%

Company to allot warrants, which will be converted as equity shares in 2015 & 2016; The additional stake would cost around Rs 312 cr

Kalanithi Maran and Kal Airways, promoters of SpiceJet, are planning to increase their stake in the airline 10 per cent to 68.42 per cent. The additional stake will cost the promoters Rs 312 crore.

Maran and Kal will subscribe for fresh equity shares in two tranches; the company plans to allot 81,680,629 shares in the first and 107,410,479 shares in the second.

The company did not respond to a detailed questionnaire in this regard till the time of going to press.

Sources said the promoters would subscribe to a fresh issue of 189.1 million warrants, to be priced according to the Securities and Exchange Board of India’s formula for preferential issues. These warrants will convert to equity shares in two tranches—-in April 2015 and April 2016.

The sources added so far, the promoters had infused about Rs 1,300 crore into the airline. Maran had acquired SpiceJetfor Rs 750 crore in 2010 and an additional Rs 550 crore was invested later, by way of equity.

Meanwhile, the airline has said its management had decided not to add additional capacity this financial year.

Following a cut in capacity in the quarter ended June this year, the level would remain unchanged through the next two years, said the company’s annual report.

Last year, SpiceJet had inducted seven Boeing 737NGs and redelivered one aircraft, taking its fleet size to 58. One domestic (Dharamshala) and one international airport (Muscat) was added to the airline’s network.

In its new network and schedule (from March 30, 2014), 26 routes and seven stations were discontinued, along with capacity reduction on 14 routes. The stations discontinued included Bhopal, Allahabad, Pondicherry, Tiruchirappalli, Guangzhou, Riyadh and Bangkok.

“The company will strive to increase its asset utilisation to produce more seat-km, depending on windows of opportunities,” the annual report said.

The airline said it planned to enhance ancillary revenue and cut costs by optimising resources, increasing asset utilisation, etc. It also planned to improve on-time performance, aircraft cleanliness and instant communications.

It added the profitability of all airlines was stressed due to high fuel and dollar rates. SpiceJet’s operating profits continue to be hit by various factors, particularly high aircraft fuel costs, significant depreciation in the value of the rupee and pricing pressures from competition.

For 2013-14, SpiceJet reported a net loss of Rs 1,003.2 crore, compared with losses of Rs 191.1 crore for 2012-13 and Rs 605.8 crore for 2011-12. Yields and load factor were under pressure due to the tough economic environment, the airline said.

SPICING UP

• The additional stake will cost the promoters about Rs 312 crore
   
• Maran and Kal Airways will subscribe for fresh equity shares in two tranches
   
• The company plans to allot 81,680,629 shares in the first and 107,410,479 shares in the second
   
• The promoters are likely to subscribe to a fresh issue of 189.1 million warrants
   
• Maran had acquired SpiceJet for Rs 750 crore in 2010
   
• SpiceJet reported a net loss of Rs 1,003.2 crore in 2013-14, compared with losses of Rs 191.1 crore for 2012-13 and Rs 605.8 crore for 2011-12

Source : T E Narasimhan, http://www.business-standard.com