SpiceJet promoter and media baron Kalanithi Maran is in talks with potential buyers to sell his majority stake in the low-cost airline, which posted a record loss of Rs. 1003.24 crore in the last financial year.
SpiceJet is staring at a financial collapse after its efforts to find an investor failed. It needs an immediate infusion of about Rs. 2,000 crore to survive.
SpiceJet, which has a fleet of 38 Boeing 737 and 15 Bombardier Q-400 aircraft, is India’s second-largest low-fare airline, with a domestic market share of 19%.
Sources said the promoters have initiated discussions with former SpiceJet director and co-founder Ajay Singh and a clutch of private equity players for buying out Maran’s 53.48% stake in the airline.
Singh did not respond to HT’s calls and messages seeking comments for this story.
“Currently we are in our silent period and hence would not be able to comment,” SpiceJet said, in response to an email from HT.
Industry sources described SpiceJet’s financial condition as “grave”. “SpiceJet requires around $250 million as on March 2014 to bring books in order,” said Kapil Kaul, south Asia chief executive of aviation consultancy Centre for Asia Pacific Aviation (Capa).
The airline’s combined losses from 2006-07 to 2013-14 was Rs. 2,194 crore while the total debt as on March 2014 was Rs. 1,738 crore. SpiceJet’s total cash position as on March 2014 was only Rs. 5 crore while its net worth stood at a negative Rs. 1,019 crore.
Capa estimates the airline to post a loss Rs. 90-Rs 110 crore in the first quarter of current financial year.
Raising capital in next 1-3 months was critical for SpiceJet, said Kaul.
“It may require further fund infusion for growth and expansion. Restructuring efforts are not showing results largely due to very complex competitive dynamics and lack of funds to execute it. I expect a significant downsizing post a possible fund infusion,” Kaul added.
On May 20, SpiceJet —which operates more than 331 daily flights to 47 destinations including seven international cities — had said it was in advanced talks with an “external entity” for a capital infusion. It did not, however, name the potential investor.
Maran had bought majority stake in SpiceJet from its promoter Bhupendra (Bhulo) Kansagra and distressed-assets buyout specialist Wilbur L. Ross in 2010. Singh, along with the Kansagra family had launched SpiceJet in 2005.