New Delhi: Budget carrier SpiceJet Ltd has sought clearance from the Reserve Bank of India (RBI) to raise $270 million (Rs 1,212 crore) from Canada’s export finance agency Export Development Canada (EDC) for financing fleet expansion.
SpiceJet, which uses 29 Boeing Co. B737 aircraft for 192 daily flights to 23 cities, plans to add 15 Canadian-manufactured Bombardier Q400 short-haul aircraft from July to connect more cities.
“There is a clearance to raise $270 million from EDC, which is the equivalent of US Exim Bank. RBI approvals are likely to come soon,” said a person familiar with the development who asked not to be identified.
A second person, who also didn’t wish to be identified, said the carrier will do an “outright purchase” of the aircraft and funding for 15 planes has already been tied up.
SpiceJet had ordered 15 Q400 aircraft last year with the option of 15 additional Q400s, the first official said. The order for the second lot is yet to be confirmed.
Airlines typically take loans for buying Boeing aircraft from the Exim Bank in the US, which provides a cheaper rate of interest, while Airbus SAS aircraft are funded from similar export agencies in Europe.
Kalanithi Maran, promoter of media group Sun TV Network Ltd, bought a 37.73% stake in SpiceJet from its original promoter Bhupendra (Bhulo) Kansagra and distressed-assets buyout specialist Wilbur L. Ross last year for around Rs 750 crore. After an open offer to buy more shares from the market, he controls 38.6% of the airline.
The SpiceJet stock has, however, crashed from Rs 81.90 a share on 3 January to Rs 27.20 on 23 June on the Bombay Stock Exchange (BSE) because of political issues (Maran is grand nephew of Dravida Munnetra Kazhagam leader M. Karunanidhi, who lost the assembly elections in Tamil Nadu, and brother of Dayanidhi Maran, the current Union textiles minister and former telecom minister who is being investigated by the Central Bureau of Investigation in connection with the second-generation telecom spectrum case) said Kapil Kaul, South Asia chief executive of the Centre for Asia Pacific Aviation (Capa). SpiceJet lost 1.98% on Thursday while BSE’s benchmark Sensex gained 1.01%.
“Currently, downward bias on SpiceJet is because of sentiments relating to the Marans,” Kaul said. “(But) we expect another profitable year for SpiceJet (2011-12), it has strong fundamentals.”
Six-year-old SpiceJet posted a record annual profit of Rs 101.15 crore in 2010-11, up from its first-ever profit of Rs 61.45 crore in fiscal 2010.
Jet Airways (India) Ltd announced a Rs 85.84 crore loss for fiscal 2011, while Kingfisher Airlines Ltd’s loss was Rs 1,027.39 crore.
Kalanithi Maran has pledged a part of his shares in SpiceJet in the past few months to raise cash. The amount of cash raised as a result is not yet known, but Kaul said this could have gone towards some initial payment for the aircraft, known as pre-delivery payment (PDP). Capa estimates that 15 Q400s will require $45 million as PDP.
From the second week of July, the airline plans to launch regional operations from its hub in Hyderabad using the Q400s. The airline has a 14.2% share in the domestic market in terms of passengers flown.