SpiceJet surges 20% on reports of stake buying by IndiGo co-founder Rakesh Gangwal

Shares of SpiceJet hit a 20% upper circuit limit in intraday trade on Friday amid reports that IndiGo co-founder Rakesh Gangwal is mulling a stake purchase in the cash-strapped carrier. As per reports, Gangwal, who resigned from IndiGo’s board in February 2022, is in the advanced stages of talks to pick up a 'sizable' stake in SpiceJet.

In February 2022, Rakesh Gangwal stepped down from the board of InterGlobe Aviation, the parent company of IndiGo, and said he would dilute his stake in the company over the next five years. In September 2022, the Gangwal family sold 2.8% shares in IndiGo for ₹2,000 crore, followed by 4% for ₹2,900 crore in February 2023. Recently, in August, they sold another 4% stake in the airline for ₹3,730 crore.

At the end of the June quarter, the family owned a 29.72% stake in the country’s largest airline by passengers carried and fleet size. This includes 13.23% and 2.99% shares by Gangwal and his wife Shobha Gangwal, respectively, while their Chinkerpoo Family Trust holds a 13.5% stake.

Cheering the news, SpiceJet shares gained 20% to hit a fresh 52-week high of ₹43.82 in intraday trade on the BSE. Early today, the aviation stock opened a tad lower at ₹36.45 against the previous closing price of ₹36.52, but it gained momentum in the second half of day’s trade amid speculation over stake purchase by Rakesh Gangwal. Finally, the stock settled 19.39% higher at ₹43.60 levels, with a market capitalisation of ₹2,982.85 crore.

The share price of SpiceJet has nearly doubled in nearly 5 months after hitting its 52-week low of ₹22.65 on May 23, 2023.

SpiceJet is in desperate need of funds as the budget carrier recently made repayment of dues to the airline's former promoter Kalanithi Maran’s Kal Airways Private Ltd and international bank Credit Suisse. On September 14, 2023, the airline transferred $1.5 million to global investment bank and financial services firm Credit Suisse as per the directive issued by the Supreme Court of India. Besides, the airline made a payment of ₹100 crore to Kal Airways, as per the directions of the Delhi High Court.

For Q1 FY24, SpiceJet reported a net profit of ₹205 crore for the quarter ended June as against a loss of ₹789 crore in the year-ago period. Total operating revenue for the April-June quarter was ₹2,002 crore compared with ₹2,457 crore in the same quarter of the previous year. For the same comparative period, operating expenses were ₹1,291 crore as against ₹2,072 crore. Operating profit or earnings before interest, taxes, depreciation, and amortisation (EBITDA) was ₹525 crore for the reported quarter as against a loss of ₹393 crore in Q1 FY23.

The low-cost carrier recorded the highest domestic passenger load factor of 90% in the first quarter owing to a strong demand for air travel in India. Passenger revenue per available seat kilometer (RASK) increased by 26% due to an increase in yield - the average amount of revenue received per paying passenger flown one kilometre - by 22%.

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