New Delhi: Media tycoon Kalanithi Maran is likely to invest more money in SpiceJet Ltd in his third infusion of funds into the budget airline to help it expand its fleet and tide over losses.
Maran, who heads Sun Group, invested Rs.130 crore into SpiceJet in November last year and about Rs.100 crore in April.
He will likely infuse an additional Rs.200 crore into the airline shortly, according to a person familiar with the matter.
The investment will increase his stake to 53.6%, up five percentage points.
Under markets regulator Securities and Exchange Board of India (Sebi) guidelines, Maran can only acquire up to 5% additional equity in each fiscal year.
The limit has already been reached for the current fiscal year. Maran also acquired 5% of SpiceJet in the year ended last 31 March.
Maran is likely to infuse the money now, and the increase in his stake may take effect in April, at the start of the next financial year, said the person, who declined to be named.
In 2010, Maran took over Gurgaon-based SpiceJet from Bhulo Kansagra through Kal Airways Pvt. Ltd, which owns 48.6% of the low-fare airline. Maran and his wife Kavery this week left the board of Kal Airways. Maran remains chairman of the airline.
SpiceJet needs a fresh infusion of funds to add to its fleet and help tide over losses. The airline, which needs to pay for three Bombardier Q400 turboprop planes, had its net worth eroded by Rs.163.52 crore net loss in the quarter ended 30 September.
SpiceJet will issue “convertible debenture and/or warrants convertible into up to a maximum of 52.177 million equity shares to the promoter of the company on preferential basis,” the company said in a statement to the BSE late on Wednesday.
This could fetch the budget airline nearly Rs.200 crore at Thursday’s closing price of Rs.37.40 per share.
The conversion price was not disclosed by SpiceJet.
Kapil Kaul, South Asia chief executive of aviation consulting firm Centre for Asia Pacific Aviation (Capa), said he was surprised by the fresh equity infusion “but Capa welcomes the decision as it will strengthen the airline at a critical time”.
“Promoters continue to show confidence and demonstrate commitment,” Kaul said.
SpiceJet made a profit of Rs.101.16 crore in 2010-11 and lost Rs.605.77 crore in 2011-12. This fiscal, it made a profit of Rs.56.15 crore in the first quarter before swinging to a loss in the second.
Auditors have said the September loss fully eroded the net worth of the company and its ability to operate on a “going concern” basis is “significantly” dependent on establishing continued profitable operations and raising cash to meet short- and long-term obligations.
The airline’s ability to control costs holds the key to its full-year financial performance, said Kaul.
“Capa expects Q3 to be profitable with Q4 nearing break-even, based on current trends. But based on expected Q3 profits, we expect a modest profit on a full-year basis,” Kaul said.
“However, final outcome largely dependent on the cost environment.”