SpiceJet shares surge 10% on fund infusion buzz

Share of low-cost carrier SpiceJet rallied 10% in intraday trade on Wednesday after reports suggested that the cash-strapped airline is planning to infuse funds through a promoter group entity, Spice Healthcare Private Limited. The Gurugram-based airline will issue 3.4 crore equity shares of the face value of ₹10 apiece and 13.5 crore warrants to Spice Healthcare. The issue price for the equity shares will be determined in accordance with the SEBI ICDR Regulations, as per the airline.

Buoyed by fund infusion plan, shares of SpiceJet gained 10% to hit an intraday high of ₹32.25 on the BSE, on the back of strong volume trade. As many as 43 lakh shares changed hands over the counter compared to a two-week average volume of 10.85 lakh stocks, while the market capitalisation rose to ₹1,872 crore.

The aviation stock trades 38% lower than its 52-week high of ₹52.40 touched on August 3, 2022, while it has risen 42% against its 52-week low of ₹22.65 hit on May 23, 2023. The smallcap stock has fallen 30% in the last one year; 13% in six months; and 20% on a year-to-date (YTD) basis. Reversing its losses, the counter gained over 1% in a month and 4% in a week.

On July 12, 2023, SpiceJet informed the exchanges that its promoter Ajay Singh offered to infuse ₹500 crore into the airline by way of subscribing to fresh equity or convertible instruments. The fund infusion would enable the carrier to seek additional credit facilities worth ₹206 crore under the government’s Emergency Credit Line Guarantee Scheme.

“The board of directors of the company in its meeting held on July 12, 2023, considered options for raising fresh capital for the company wherein Ajay Singh, promoter of the company in order to strengthen the financial position of the company offered to infuse ₹500 crore by way of subscription to equity shares and/or convertible securities/equity share warrants on preferential basis along with promoter group of the company,” it said in a BSE filing.

The board further decided to issue fresh equity or convertible instruments on preferential basis to the promoter and the promoter group of the company in one or more tranches at an issue price to be determined in accordance with the SEBI ICDR Regulations, subject to requisite approval.

SpiceJet is facing funding shortage to revive 25 grounded aircrafts, almost half of its fleet that was grounded due to engine supply issue from the U.S. engine maker Pratt & Whitney. 

The low-cost airline had recently restructured over $100 million outstanding dues to Carlyle Aviation Partner into equity shares and compulsorily convertible debentures (CCDs). Carlyle Aviation, which is an aircraft lessor, is the commercial aviation investment and servicing arm of private equity giant Carlyle's. Following the transaction, Carlyle Aviation will hold over 7.5% equity stake in the airline.

SpiceJet had earlier completed the hive-off process of its cargo and logistics division ‘SpiceXpress’ into a separate entity, SpiceXpress and Logistics Pvt Ltd. The hive-off paved the way for SpiceXpress to raise funds independently.

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