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Business News/ Companies / SpiceJet co-founder Ajay Singh said to plan investment in airline
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SpiceJet co-founder Ajay Singh said to plan investment in airline

Ajay Singh plans to invest as much as Rs1,300 crore in the airline with some partners, according to a source

There’s no decision yet if it will involve the purchase of new shares or existing stock from majority shareholder Kalanithi Maran, the source said. Photo: PTIPremium
There’s no decision yet if it will involve the purchase of new shares or existing stock from majority shareholder Kalanithi Maran, the source said. Photo: PTI

New Delhi/Mumbai: Ajay Singh, a co-founder of SpiceJet Ltd, plans to invest as much as 1,300 crore in the distressed carrier with some partners, a person with direct knowledge of the matter said.

Singh, who resigned as a director of the airline in 2010, and his partners will meet with Indian aviation ministry officials on 22 December, the person said, asking not to be identified as the negotiations are private. There’s no decision yet if it will involve the purchase of new shares or existing stock from majority shareholder and billionaire Kalanithi Maran, the person said.

SpiceJet delayed salary payment to staff, canceled flights and had to give back planes in the past month as it struggled to remain operational. India’s civil aviation ministry announced a rescue package for the airline on 16 December to prevent the collapse of a second airline in as many years. Liquor baron Vijay Mallya’s Kingfisher Airlines Ltd was grounded in 2012 amid mounting debt and billions of dollars in orders with Airbus Group NV.

“SpiceJet’s problem is currently under-capitalization," said Harsh Vardhan, chairman of New Delhi-based Starair Consulting. “Ajay Singh has a lot of backers. The big question is how much money is being brought in."

SpiceJet shares surged 13% to 14.95 at 9:20am in Mumbai, making it the best performing stock in the BI Asia Pacific Airlines index.

Bank loans

India’s government said on 16 December that banks may be asked to lend as much as 600 crore to SpiceJet, as the indebted carrier seeks investment over the next two months to keep flying. State oil companies will be asked to provide SpiceJet with as much as 15 days worth of credit and airport operators will offer a 15-day payment window, the civil aviation ministry said on 16 December.

Maran will guarantee the loans and repay as soon as an investment is secured, part of a package of steps to prevent a shutdown that would damage India’s airline industry, the government said in New Delhi on 16 December. It arranged a credit line for fuel for SpiceJet and eased booking curbs imposed after the carrier canceled flights and missed salary payments.

Media tycoon Maran and his company KAL Airways Pvt. Ltd together own more than 58% of SpiceJet, according to data compiled by Bloomberg. He spent 740 crore buying a stake from Wilbur Ross in 2010 at 47.25 per share and has invested a further 560 crore, SpiceJet has said.

SpiceJet, based near New Delhi, is the second-biggest budget carrier in India after IndiGo and has reported five straight quarterly losses. It has tried for more than two years to woo an external investor and has cut its fleet of Boeing Co. planes as part of a survival strategy.

Despite airlines’ struggle to make money in India, the growth potential has convinced Singapore Airlines Ltd and AirAsia Bhd to start operations in India. Domestic travellers are projected to triple to 159 million by 2021.

“We’ll have to wait and see when the money comes in as SpiceJet has been saying that they’ve been talking to investors for the last 18 months," Starair’s Vardhan said. Bloomberg

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Published: 19 Dec 2014, 09:48 AM IST
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