SpiceJet, the low-cost carrier that has been navigating turbulent skies, has raised ₹3,000 crore by selling equity shares to qualified institutional buyers (QIBs). This significant financial boost is expected to help the struggling airline settle its mounting dues and regain operational stability. The airline has been grappling with various challenges, including grounded aircraft, legal battles, and financial woes. Will this fresh capital infusion be enough to steer SpiceJet back on track? Let’s delve into the details.
SpiceJet’s QIP Success: Raising ₹3,000 Crore Through Institutional Investors
SpiceJet’s recent Qualified Institutional Placement (QIP) was met with strong demand from foreign and domestic investors. The airline’s fundraising committee approved the allotment of more than 48.7 crore equity shares at ₹61.60 per share. Foreign entities such as Societe Generale – ODI, Goldman Sachs (Singapore) Pte – ODI, and Nomura Singapore Ltd are among the prominent investors who have bought into the struggling airline.
The total amount raised, just shy of ₹3,000 crore, is expected to provide some relief to SpiceJet, enabling the airline to clear significant dues and address operational challenges.
How Will the Funds Be Used?
The airline, which has been flying for 19 years, is facing multiple hurdles. From grounded aircraft to unpaid statutory dues, SpiceJet’s challenges are vast. The proceeds from this capital raise will be used for several key purposes, including:
- Settling Statutory Dues: SpiceJet has accumulated over ₹601.5 crore in statutory dues as of September 15, 2024. This includes ₹297.5 crore for Tax Deducted at Source (TDS), ₹156.4 crore for employee provident fund payments, and ₹145.1 crore for Goods and Services Tax (GST). These dues have been building up due to the airline’s ongoing financial constraints.
- Clearing Vendor Liabilities: SpiceJet will use part of the raised funds to settle dues with aircraft and engine lessors, engineering vendors, and financiers. With many planes grounded due to disputes over unpaid leases, resolving these liabilities is crucial for the airline to restore its fleet and resume full operations.
- Improving Operational Stability: The airline is operating with a reduced fleet and is facing fierce competition in India’s aviation market. SpiceJet aims to use these funds to ensure long-term operational stability by maintaining its fleet and reducing financial pressure.
Key Institutional Investors and Allotment Details
SpiceJet’s QIP was oversubscribed, with more than 80 participants in total. The most significant allotments went to five key investors, each receiving over 5% of the shares offered in the QIP:
- Authum Investment and Infrastructure Ltd: 9.33% stake
- Discovery Global Opportunity (Mauritius) Ltd: 8.33% stake
- Troo Capital: 6.67% stake
- Societe Generale – ODI: 6.04% stake
- Goldman Sachs (Singapore) Pte – ODI: 5.33% stake
Following the allotment of equity shares, SpiceJet’s paid-up share capital has increased from ₹794.67 crore (79.46 crore shares) to ₹1,281.68 crore (128.16 crore shares). This expansion of equity base strengthens the airline’s financial foundation but may dilute the holdings of existing shareholders.
Challenges Still Loom Despite the Fundraising Success
While this infusion of capital is a positive development for SpiceJet, the airline’s financial troubles are far from over. The company continues to face intense competition in the aviation sector, and its market share has shrunk to 2.3% as of August 2024, as per Emkay Global Financial Services. Additionally, the Supreme Court recently upheld an order grounding three of the airline’s aircraft engines due to non-payment of dues, further compounding its operational woes.
The road ahead for SpiceJet will require more than just financial injections. The airline will need to stabilize its operations, address legal challenges, and enhance its fleet to stay competitive in the market.
Public Opinion: Will SpiceJet Soar Again?
With the ₹3,000 crore capital raise, SpiceJet has taken a crucial step toward resolving its financial challenges. However, questions remain about the airline’s ability to sustain long-term profitability.
What do you think? Will this fundraise be enough to turn SpiceJet around? Let us know in the comments!
