The number of promoter shares pledged rose to 24.37% of 599,450,183 total shares by the end of September from 20.19% at the end of June, according to BSE data.
During the same period, the airline saw an outgo of Rs579 crore towards a court deposit in the ongoing dispute with Maran, which is under arbitration. The airline has deposited Rs250 crore in a cash deposit and the balance of Rs329 crore by way of a bank guarantee.
“The additional shares were pledged towards non-fund limits for company security deposits. Their value keeps going up and down so that percentage keeps changing. About 50% money for the court deposit came from internal resources, rest from the bank," said a person close to the airline with knowledge of the matter, who did not wish to be named.
A SpiceJet spokesman said the shares were pledged to support the “credit line of the company" and the airline did not see any additional fund requirements towards the ongoing case.
The dispute with Maran relates to the transfer of the airline from Maran to Singh. Maran had transferred a 58.46% stake in SpiceJet, or 350.4 million shares, to Singh in February 2015, leading to a change in ownership of the airline.
Under the share purchase agreement, Maran was to receive redeemable warrants in return for the Rs690 crore he spent on SpiceJet towards operating costs and debt payments. Maran has gone to the courts saying he has not been issued these warrants, and the matter is under arbitration.
Most of the arguments in the arbitration from both sides are nearly over and the verdict is expected anytime, a person close to Maran said, requesting anonymity. Maran has said he wants the airline back.
“Our fundamental plea before the arbitration panel is that the agreement has become void because the warrants have not been allotted, so we are basically suing for restitution under section 65 of the Contract Act. We are saying reverse the entire transaction," said a person close to Maran, who wished not to be named. If this can’t be done, then Maran wants to be compensated, he added.
“If it can’t be restituted then we need to be compensated for the losses suffered, because we have done all that we could do under procedures. It’s SpiceJet that has not honoured its commitment by not issuing the warrants. We even called the board meeting for a correct preferential offer under the SEBI (Securities and Exchange Board of India) formula to arrive at Rs16.30 apiece warrant, and this was cleared by the extraordinary general meeting," said the person close to Maran.
“We are saying give us some justice, we have done nothing wrong. Even to get this money (Rs579 crore) out we had to move courts. The stakes involved are huge."
Singh has nursed the airline from a near shutdown and a valuation of Rs650 crore to Rs8,300 crore (Jet Airways is valued at Rs7,200 crore and IndiGo at Rs43,000 crore).
“We will not have to pay more than Rs579 crore. That’s the most. It won’t go beyond that," said the person close to the airline who did not wish to be named.
“Even if it happens you will have to protect the minority and then will have to do a rights issue. There are so many institutions there they will also fight then. It doesn’t work that way." This official said the airline had written letters to regulators but did not get clearance to issue the warrants.
“The entire case of the other side is based on wrong surmises, whereas our stand is that there has been no breach by the company or its promoters of any sort. Therefore, the suggestion that we will require more funds is completely baseless," the SpiceJet spokesman said.
An analyst said one could not predict which way the verdict would go, but the airline remains on a firm footing.
“I expect a significant but not a structural impact—in case of an adverse outcome," CAPA-Centre for Aviation’s South Asia chief executive Kapil Kaul said. “SpiceJet will be fully prepared for the arbitration award whilst maintaining focus on their business plan."
HDFC Securities Institutional Research maintained a ‘neutral’ stance on the airline stock in an 11 November report, while revising its target price to Rs145.
“Though we have considered dilution (24%) of the warrants issued to the earlier promoter, the arbitration verdict is expected in the next few months. Any verdict which does not lead to dilution will be positive, and an upside risk to our assumptions," the report said.
On Thursday, shares of SpiceJet Ltd fell 1.12% to Rs140.75 apiece on the BSE while the benchmark Sensex surged 1.08% to end the day at 32,949.21 points.