SpiceJet Shares Touch New 52-Week High Again After Airline Confirms Interest To Buy Go First

The share price of domestic airline SpiceJet Ltd has been moving in an upward trajectory since the beginning of this week. After touching a new 52-week high value of 64.29 on Monday, SpiceJet shares hit a new 52-week high value of 69.20 for the second consecutive day on Tuesday. Today, shares of SpiceJet Ltd traded 5.30% higher at Rs 67.61 per share at 11:12 am IST. Today's rally in the stock's share price is fuelled by a clarification issued by the airline wherein it confirmed showing interest in buying the embattled low-cost carrier Go First.

In an exchange filing on Tuesday, SpiceJet said, "...SpiceJet Limited (the "Company" or "SpiceJet") has expressed interest in the Resolution Professional of Go First and wishes to submit an offer post diligence, with a view to creating a strong and viable airline in a possible combination with SpiceJet."

According to a media report, in a letter SpiceJet had expressed interest in the resolution process of Go First and wished to submit an expression of interest (EoI) along with a viable revival plan for the cash-strapped airline.
SpiceJet shares grabbed attention on Monday after media reports highlighted that SpiceJet is in a race with two others - Sky One company and Safrik Investments to acquire Go First. SpiceJet shares touched the upper circuit of Rs. 64.29 on December 18, 2023. The jump in the stock's share price shows that investors are pleased with the airline's decision to buy the grounded airline.

Notably, the last date for submission of the bids concerning the acquisition of Go First was November 22. After the deadline passed it is believed that the lenders were considering liquidation of Go First as they did not receive any bids till the last date.

The Wadia group-owned Go First, and filed for voluntary insolvency before the National Company Law Tribunal (NCLT) in the month of May. Half of Go First's fleet was grounded in May after the issue of faulty engines. In the same month, Go First also filed for bankruptcy and blamed US-based engine manufacturer Pratt & Whitney (P&W) for its dire situation. The embattled airline said that it decided to file for bankruptcy following "the ever-increasing number of failing engines supplied by Pratt & Whitney's (P&W) International Aero Engines"

Go First lenders sought $1 billion from Pratt & Whitney for supplying faulty engines and failing to replace them on time. As per reports, SpiceJet, comes out to be a strong contender when it comes to the ownership transfer of the bankrupt airline. It is worth mentioning that SpiceJet is itself struggling with a cash crunch. Last week, the Board of the Company approved and initiated the process of raising fresh capital of about US$270 million to strengthen its financial position and provide resources to invest in growth plans.

SpiceJet is expected to utilize a portion of these funds to acquire GoFirst.

SpiceJet stock price performance:

SpiceJet shares have gained 143.84% in the last six months, the stock is up 72.79% this year so far. In the last one year the returns from the stock have gained 63.35%.

Financials of the company:

The Company has incurred a net loss (after comprehensive income) of Rs. 4,284.46 million and incurred a net loss (after other ~ comprehensive income) of Rs. 2,239.12 million for the quar1er and six months period ended 30 September 2023, respectively, and as of that date, the Company had negative retained earnings of Rs. 76,396.03 million and negative net worth of Rs. 30,233.97 million.

The losses faced by the airline over the last few years have been primarily driven by adjustments on account of the implementation of ( Ind AS I 16, adverse foreign exchange rates, and operational disruption during COVID-19 followed by sub-optimal operations due to liquidity constraints faced by the Company.