After months of speculation, Kalanithi Maran and family on Thursday finally decided to exit from...
After months of speculation, Kalanithi Maran and family on Thursday finally decided to exit from the cash-strapped no-frills carrier SpiceJet that they bought in 2010. The company’s board, which met in Chennai, decided to transfer the ownership, management and control of the company from the current owners, Maran and KAL Airways, to Ajay Singh, who is a former promoter of the airline.
Though the financial details were not disclosed, going by Thursday’s market cap of the company at R998.30 crore, the Marans’ 53.48% stake would be around R500 crore. Maran had bought the company from Singh and UK-based Bhupendra Kansagra’s holdings in 2010 for around R750 crore.
SL Narayanan, chief financial officer of the Sun Group, told business news channels that the Marans, who have partly paid-up warrants worth R18 crore, would make them fully paid-up and retain a minority stake as investors. This would require them to pump in R80 crore and their stake would correspond to around 10%.
Narayanan said that the promoters had exited the company as no banks were willing to lend them a paltry amount of R600 crore even when the promoter-chairman was willing to give a personal guarantee. He said that this was even when bank loans to SpiceJet totalled less than R300 crore.
He was also critical of the norms brought in by the UPA government allowing foreign carriers to pick up to 49% stake in Indian airlines. This is because it also provided greenfield ventures through this route, which Narayanan felt made weak, incumbent airlines appear a less attractive option to foreign carriers from the investment point of view.
Going by norms, the transfer in ownership to Ajay Singh and the PE investors he brings along would require an open offer. However, it is understood that they would seek an exemption. Experts said that in cases where a company’s ownership changes hands to save it from extinction, getting an exemption from an open offer should not be a problem.
The entire stake sale plan would also be presented to the civil aviation ministry for its nod. The ministry has been keen on saving the airline from shutting down and has been brokering a deal between Singh and the current owners for the last few months.
Sanjiv Kapoor, the COO of SpiceJet who has been battling to maintain operations in cash-starved times, told reporters that the move is a positive development and some more steps need to be followed. He also indicated that some leasing-related contracts could be renegotiated under the new ownership.
According to Kapil Kaul, CEO, South Asia, India subcontinent for aviation consulting firm Centre for Asia-Pacific Aviation (CAPA), termed the deal as “lifesaving” for SpiceJet as it would not have survived if Singh had not stepped in.
Analysts see the timing of Singh’s re-entry into the aviation business as good given that aviation turbine fuel, which accounts for around 50% of airlines’ costs, is at a historic low at the moment. However, there’s competition as two new airlines — AirAsia and Vistara — have recently taken to the skies. The demand is there but the lean period for travel is just starting, which will last till April. However, analysts see this as positive as SpiceJet would get time to put its house in order and brace for the busy season which starts thereon.
SpiceJet has been making losses for the last three fiscal. In FY12 it lost about Rs 600 crore, about Rs 189 crore in FY13 and in FY14 it lost Rs 1,003 crore. During the first quarter of this fiscal it lost Rs 133 crore and in Q2 it was a little over Rs 300 crore. So the airline has lost Rs 1,800 crore in the last three fiscal and about Rs 443 crore in the first half of the current one.
Out of its total liabilities of over Rs 2,000 crore, SpiceJet needs to clear dues of Rs 1,400 crore immediately to continue operations. Of this, Rs 280 crore is owed to the Airports Authority of India and private airports.