Cash-strapped SpiceJet today returned to original promoter Ajay Singh for its revival in a multi-layered deal worth up to Rs 1,500 crore, as Maran family agreed to cede control with transfer of over 53 per cent stake in the airline that has been struggling for months to survive.
Singh would get 53.48 per cent stake, currently worth about Rs 500 crore, in the airline from the Maran family, while an open offer for purchase of further 26 per cent from public shareholders (worth about Rs 250 crore) will be made if asked by the markets regulator Sebi.
Kalanithi Maran-led Sun Group would also infuse Rs 80 crore in the loss-making airline following conversion of their warrants, which would give them a 10 per cent minority stake.
Marans would remain invested with this stake in the airline, which they acquired over four years ago, as a public shareholder although they would cease to be its promoters.
Singh said that road ahead for SpiceJet is “pretty tough” and its turnaround could take 2-3 quarters, while adding that more than one investor can come on board for fund infusion.
SpiceJet Chief Operating Officer Sanjiv Kapoor said he is looking forward to the carrier getting back to normalcy while some more steps may be taken for its revival.
“The ownership change in SpiceJet is a positive development. (We are) looking forward to get back to normalcy,” Kapoor told PTI.
The fresh lease of life marks the third change in ownership for the airline, which was founded in 2005 by Singh along with London-based Kansagra family of Indian origin.
US-based investor Wilbur Ross, known as a turnaround specialist, held a substantial stake for a brief period before selling it to Marans in 2010.
While the company did not disclose the financial details of the deal and revival plan, official sources said that the overall deal could be worth Rs 1,500 crore in three tranches.
The Sun Group officials and Singh also refused to comment on the specific financial implications of the deal, which has ended weeks of uncertainty about the carrier’s fate.
Marans’ exit from the ownership and management control follows months of financial crunch at the airline, which had to drastically curtail its fleet and flights beginning late last year. With a revival plan in place, sources said, the airline has been now allowed to take forward bookings.
The airline has been operating 230 flights a day, as against more than 340 before it ran into a crisis, which has also been attributed by some observers to troubles faced by the Maran family in telecom and other sectors, including for political reasons.
Sources said the airline, under new owners, would also review some existing contracts including for aircraft leases and with various vendors.
Shares of the SpiceJet gained three per cent to close at Rs 18.65 on the BSE while its value was around Rs 1,000 crore.
Under the ‘Scheme of Reconstruction and Revival’, approved by SpiceJet board today, Kalanithi Maran and KAL Airways will transfer the ownership, management and and control of the carrier to Ajay Singh.
The scheme has been submitted to the Civil Aviation Ministry for its approval, while it would take a call on open offer following legal advice and as per Sebi regulations.
Sun Group CFO S L Narayanan said the group would transfer the entire equity stake of over 53 per cent to Singh, but would remain an investor with holding of warrants (convertible into 10 per cent stake) in the carrier.
Narayanan also hoped that the new owners will better manage the airline while saving jobs and continuing flights.
Post the deal, Maran and Kal Airways would no more be classified as promoters and that status would be transferred to the new investor, he added.
There have been concerns about delayed salaries also at SpiceJet, which has nearly 5,000 employees. It has, however, begun paying salaries for the last month, December 2014.
In the last quarter ended September 30, 2014, SpiceJet reported Rs 310 crore loss, widening from Rs 124 crore in the previous quarter. The losses were, however, lower in the year-ago quarter ended September 30, 2013 at Rs 560 crore.
For the full last fiscal, the losses were over Rs 1,000 crore, which was its third consecutive year of loss since fiscal 2011-12. Prior to that, it had posted a net profit of Rs 101 crore in 2010-11 and Rs 61 crore in 2009-10.
Faced with turbulent weather, SpiceJet’s senior executives as well as potential investors have been holding parleys with Ministry officials for many weeks.
Late last month, the crisis-hit carrier had submitted a revival plan to the Ministry but was asked to submit revised one.
Promoters, Maran and Kal Airways, hold 53.48 per cent stake in the BSE-listed SpiceJet while major ‘public’ shareholders include Tata group firm Ewart Investments (1.79 per cent) and Kalpana Singh (1.41 per cent). Retail investors hold 45.69 per cent of the company that has a total market value of Rs 1,000 crore.
The government has been of the view that one more airline should not be shut down as that would send wrong signals about the economy and the sector, in particular.
With the airline grounded for almost one full-day last December due to the oil companies’ refusal to supply it jet fuel without cash, the Ministry had come to its rescue with requests to oil marketing firms and the Airports Authority of India (AAI) to extend the credit line to the airline for two weeks till December 31, 2014.
“SpiceJet is in a tough position and the road ahead is pretty tough but I think the road is worth travelling on,” Singh said.
“I think if oil prices remain where they are and there is growth in the economy, it should not take more than two or three quarters to turnaround this airline,” Singh said.
“We are confident that we will find the investors and ensure that SpiceJet survives,” he said.