SpiceJet shares surge 7% on settling ₹755 cr liabilities

Shares of SpiceJet Ltd surged as much as 7.2% on March 26 to hit an intraday high of ₹63 apiece on the BSE, after the company signed a settlement agreement with Export Development Canada (EDC) to clear liabilities worth ₹755 crore or $90.8 million in a bid to revitalise its balance sheet. The liabilities stem from a loan acquired by the airline in 2011 for the procurement of 15 aircraft, says the airline.

As per the agreement, the low-cost carrier will acquire full ownership of 13 EDC-financed Q400 aircraft, thus bolstering SpiceJet’s operational capabilities and fleet management. As part of the settlement, SpiceJet will pay a comprehensive settlement amount to resolve outstanding liabilities amounting to close to $91 million as per SpiceJet's books of accounts.

According to the Ajay Singh-led airline, this settlement alleviates SpiceJet of a substantial financial burden while laying the groundwork for a fortified balance sheet and substantial savings for the airline.

"We are pleased to have reached this settlement agreement with EDC and we thank their leadership and management team for their cooperation, understanding and progressive approach through the process. This significant milestone will allow us to strengthen our balance sheet and position the airline for long-term success," says Ajay Singh, Chairman and MD, SpiceJet.

At 3:00 pm, the share price of the low-cost carrier was trading 5.12% higher at ₹61.76. In contrast to this, the broader BSE Sensex was trading 393.16 points lower at 72,438.78. The company hit a 52-week high of ₹77.50 on February 5 this year and a 52-week low of ₹22.65 on May 23 last year. The company’s market capitalisation stood at ₹4,222.37 crore with more than 78.43 lakh shares exchanging hands on the BSE, as against the two-week average of 39.63 lakh shares.

The development comes days after the low-cost carrier announced the resolution of a $49.8 million (₹413 crore) dispute with Echelon Ireland Madison One Ltd. The airline also reached a settlement in terms with aircraft leasing firm, Cross Ocean Partners, resolving a dispute of about $11.2 million (₹93 crore). Last month, the company settled a ₹250 crore dispute with Celestial Aviation.

SpiceJet is currently in the midst of a revival plan, having completed the first tranche of capital infusion amounting to ₹744 crore. Notably, the low-cost carrier continues to face financial crunch, legal woes and regulatory troubles. The Ajay Singh-led company is also resorting to cost-cutting measures such as laying off as many as 1,000 employees as it aims to achieve “profitable growth.”

Meanwhile, in February this year, the low-cost carrier submitted a joint bid for a bankrupt no-frills carrier Go First. Singh submitted the bid in his personal capacity along with Busy Bee Airways Private Ltd. SpiceJet said its role as the operating partner for the new airline involves providing essential staff, services, and industry expertise. This collaboration is anticipated to generate synergies between the two carriers, leading to improved cost management, revenue growth, and a strengthened market position within the Indian aviation industry, the company said.