SpiceJet receives interest from two major investors for equity injection

In what could signal a significant turn of events for SpiceJet, sources familiar with the matter have revealed that two major investors have expressed interest in injecting equity into the airline. The airline's board is scheduled to convene on 11 December to deliberate on a proposal aimed at raising fresh capital through the issuance of equity shares.

Originally, SpiceJet received interest from a single investor willing to invest between Rs 1,000 crore and 1,200 crore. However, the entry of a second investor has elevated the potential deal size to an impressive Rs 1,500 crore, according to insider sources quoted by IANS.

Both investment proposals will be on the agenda for the board meeting set for Monday. The airline, currently valued at around Rs 4,000 crore in the market, is perceived as notably undervalued compared to its industry peers in the Indian aviation sector. The infusion of substantial equity holds the promise of a positive turnaround for the 18-year-old airline, which boasts several strengths contributing to its potential resurgence.

SpiceJet holds coveted slots and routes at key Indian and international airports, including Dubai, Thailand, Oman, Colombo, and Male, providing a competitive advantage in the market. This strategic positioning enhances its potential for sustained growth. Additionally, the airline has a substantial order of over 200 planes with Boeing, primarily comprising the 737 Max aircraft.

However, the airline faces legal challenges, with a Delhi High Court case involving potential insolvency risks if compelled to pay an additional Rs 100 crore to former promoter Kalanithi Maran. SpiceJet has proposed settling the dues through an equity issuance, citing financial distress attributed to operational losses, negative net worth, and employee obligations. The court has summoned the airline's Chairman and Managing Director Ajay Singh for the next hearing on January 10.

In a related incident, a Dubai-bound SpiceJet flight was diverted to Al Maktoum International Airport on 30 November and seized by lessors upon landing. Lessors had reportedly obtained a court order to repossess the aircraft. SpiceJet, however, announced on 8 December that the aircraft could return to normal operations anytime, in accordance with a Dubai court directive.

The airline is entangled in several legal battles, including insolvency pleas from four aircraft lessors — Aircastle Ireland Ltd, Willis Lease Corporation, Wilmington, and Celestial — over non-payment of dues. SpiceJet, according to aviation consulting agency CAPA India's estimates, has registered 72 aircraft until the end of FY24, with 28 operational. The airline's legal challenges add complexity to its ongoing efforts to secure much-needed financial support for its operations.