New Delhi / Mumbai: Cash-strapped discount airline SpiceJet Ltd will make a final choice over the next fortnight on how to raise funds, the company’s top executive said. Options before SpiceJet include merging with a peer, he said, as billionaire US investor Wilbur Ross joined its list of suitors.
SpiceJet, India’s third largest low-fare airline by passengers flown, is seeking to raise at least $100 million (Rs431 crore) to boost working capital. It has appointed merchant banker NM Rothschild and Sons (India) Pvt. Ltd to suggest fund-raising options.
The airline’s loss widened to more than Rs133 crore in fiscal 2008 from Rs78 crore in the previous year.
Flight plan: SpiceJet chairman Siddhanta Sharma says the company’s board and key shareholders will decide which is the best option where they get maximum value for their money with least dilution. (Ramesh Pathania / Mint).
“The merchant banker has gone and knocked on the do-ors of various people,” SpiceJet chairman Siddhanta Sharma said in an interview. “This includes stand-alone shareholders, hedge funds, VCs (venture capital firms) and so on and so forth. And I am sure they have spoken about possibilities of merger,” he said.
Sharma maintained that nothing had “crystallized” yet.
“What (Rothschild) now has to do is present the whole thing to the board in general and to key shareholders in particular,” he added. “And those shareholders will decide which is the best option where they get maximum value for their money, (with) least dilution et cetera.” DNA daily reported on Tuesday that SpiceJet may hold a board meeting on Wed-nesday but a company spokeswoman said there was no official board meeting planned.
The airline, based in Gurgaon, is controlled by investors, including the UK-resident Kansagra family, which holds a 12.91% stake. Dubai-based investment agency Istithmar World PJSC holds 13.42%; the Tata group, 6%; and the airline’s director Ajay Singh, 4.16%, in the domestic carrier.
Shares of SpiceJet were down 2.30% on the Bombay Stock Exchange (BSE) on Tuesday, closing at Rs30.45 a share against a 52-week high of Rs104.80 on 8 January. The BSE’s benchmark index, Sensex, shrank by 1.30%.
Two of India’s biggest airline groups, Kingfisher Airlines Ltd and Jet Airways (India) Ltd, had earlier shown interest in SpiceJet as also billionaire businessman Anil Ambani.
New York-based WL Ross and Co., run by Wilbur Ross, is the latest addition to the list of suitors. “We are having discussions with SpiceJet, but it is too early to know whether the negotiations will be successful,” Ross said in an email to Bloomberg. Under Indian aviation rules that cap foreign equity in airline firms at 49%, Ross will potentially be able to buy out SpiceJet’s current foreign owners but will not be allowed to pump in fresh equity. The foreign holding of SpiceJet is already touching 48.8%.
On Tuesday, Vijay Mallya, chairman of Kingfisher Airlines, said through a spokesperson he cannot comment on “speculation” that he is interested in buying a stake in SpiceJet. But one senior United Breweries Group executive said, on condition of anonymity, that Mallya was still in touch with SpiceJet’s foreign investors. Calls to London-based Bhupendra Kansagra on Tuesday were not answered.
Vipin Nair works with Bloomberg.