90% Returns In 12 Months: This Indian Airline Stock Plunges Amid Board Decisions, Share Transfers; BUY?

The shares of SpiceJet, the low-cost airline, have captured attention today with a corporate announcement. The company revealed that its board has sanctioned the transfer of 15,000 equity shares to SpiceTech System, a subsidiary of SpiceJet. This move, detailed in an exchange filing, involves the allocation of 10% of SpiceTech's total paid-up share capital to Mr Ashish Vikram, the Chief Technology & Innovation Officer of SpiceJet, as recognition of his contributions to the company's growth.

The announcement had an immediate effect on SpiceJet's stock performance. The counter opened at Rs 56, slightly below its previous close of Rs 56.38. The stock briefly climbed to a high of Rs 56.90 but soon retraced those gains, trading lower by the afternoon session. As of 2:50 pm, SpiceJet shares were down by nearly 2.50% at Rs 55 on the Bombay Stock Exchange (BSE).

Following the share transfer, SpiceJet's stake in SpiceTech System will stand at 92,000 equity shares of Re 1 each, constituting 58% of SpiceTech's total paid-up share capital. This move aligns with SpiceJet's strategy of boosting its subsidiary's operational capabilities and recognizing internal talent.

In addition to the share transfer, SpiceJet's board is scheduled to meet on July 23 to deliberate on raising fresh capital through a Qualified Institutional Placement (QIP). The company is considering issuing eligible securities to qualified institutional buyers.

Earlier this year, SpiceJet secured in-principle approval from the Bombay Stock Exchange (BSE) for a fund infusion of Rs 2,242 crore. The airline successfully raised Rs 1,060 crore through a preferential issue in two tranches. Despite this influx of funds, SpiceJet's financial performance has been mixed. For the January-March quarter of 2023-24, the airline reported a robust standalone profit after tax (PAT) of Rs 119 crore, a sharp increase from Rs 16.85 crore in the same quarter of the previous year.

However, the full fiscal year 2023-24 saw SpiceJet post a loss of Rs 409.43 crore, a significant improvement from the Rs 1,503 crore loss reported in FY23. In the December quarter, the airline faced another setback, reporting a loss of Rs 301.45 crore, contrasting with a profit of Rs 106.82 crore in FY23.

SpiceJet has been grappling with operational difficulties for several quarters. The airline has reportedly fallen behind on Employee Provident Fund contributions for its 11,581 employees since January. Additionally, as of July 19, 33 of SpiceJet's aircraft - including 15 Boeing 737s and 18 regional jets Q400 - were grounded due to various reasons. SpiceJet's fleet comprises a total of 60 planes, with 32 Boeing 737s and 24 Q400s, alongside two Airbus 340s and two Airbus A320s on wet lease.

Despite these challenges, SpiceJet's stock has delivered a remarkable return of over 90% in the last year. The market's reaction and the company's financial strategies will be watched by investors.