SpiceJet to Raise Rs 3,200 Cr via Debt and Equity for Fleet and Operations

SpiceJet, a financially struggling domestic airline, plans to raise Rs 3,200 crore through various means, including QIP, warrants, and promoter capital infusion. The funds will be used to bring grounded aircraft back into operation, settle liabilities, induct new fleet, and for other general purposes. This information was shared in a presentation on Friday.

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Ajay Singh-promoted SpiceJet aims to raise Rs 2,500 crore via QIP and Rs 736 crore through previous warrants and promoter infusion. These proposed funds are subject to shareholder approval. Earlier this year, the airline managed to raise only Rs 1,060 crore through preferential issues against its Rs 2,250 crore funding plan announced in December last year.

Operational Challenges and Fleet Reduction

The airline has faced several challenges leading to its current financial woes. Factors such as fleet reduction and subsequent grounding, higher working capital costs, escalating fixed costs, airport rentals, and outstanding statutory dues have been cited. As of 2024, SpiceJet's operational fleet reduced to 28 planes from 74 in 2019. According to Planespotter.net, only 20 aircraft were operational as of September 5, with 38 grounded.

Many of these aircraft are out of operation due to legal actions by lessors and other vendors over non-payment issues. The airline has Rs 3,700 crore dues to lessors and engineering liabilities, leading to the grounding of aircraft. Additionally, there are Rs 650 crore in outstanding statutory dues.

Turnaround Strategy and Ancillary Revenue Focus

As part of its turnaround strategy, SpiceJet plans to unground and expand its fleet while enhancing its presence on profitable routes. The airline will also focus on ancillary revenue streams and cargo operations among other areas.

In a separate filing, SpiceJet announced entering into a term sheet with Carlyle Aviation Management to restructure part of its dues related to aircraft lease rentals amounting to USD 137.68 million. Lessors will consider purchasing compulsorily convertible debentures of SpiceJet's subsidiary SpiceXpress & Logistics worth USD 20 million.

Restructuring Lease Obligations

Pursuant to Regulation 30 of the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015, SpiceJet Limited and Carlyle Aviation Management Limited have agreed to restructure certain aircraft lease obligations amounting to USD 137.68 million as of June 30, 2024. This amount will be adjusted to USD 97.51 million subject to further adjustments based on specific events agreed upon in the definitive agreement.

The restructuring involves issuing or purchasing securities compliant with Indian law and shareholder approval. Equity shares will be issued at Rs 100 per share, a premium of about 39% on Friday's closing price. The transaction aims to partially restructure the outstanding arrears due to lessors, thereby deleveraging the company's balance sheet.

This strategic move is expected to help SpiceJet manage its financial obligations better while focusing on growth and operational efficiency in the coming years.