SpiceJet QIP

SpiceJet’s ₹3,000 Crore QIP Boost—Is This the Airline’s Path to Recovery?

SpiceJet is back in the spotlight after pulling off a major financial move that could steer the airline back on course. On September 23, the airline’s shares surged by 10% as it raised a whopping Rs 3,000 crore through a successful Qualified Institutional Placement (QIP). For a company battling headwinds for years, this financial boost couldn’t have come at a better time.

How SpiceJet Raised Rs 3,000 Crore and Why It’s a Big Deal

Struggling for years with financial instability, SpiceJet decided to raise funds by selling shares to Qualified Institutional Buyers (QIBs). This move wasn’t just a quick fix but a carefully calculated strategy to attract prominent foreign investors and increase liquidity. After gaining a 99.8% approval through a postal ballot on September 13, the airline set its sights on reviving its operations.

The initial plan was to raise Rs 2,500 crore through the QIP and an additional Rs 736 crore from previous warrants and promoter contributions. However, with high demand, the airline raised a grand total of Rs 3,000 crore, drawing the attention of major global investors.

Who Invested in SpiceJet’s Revival?

The QIP wasn’t just another fundraising effort—it was oversubscribed, signaling strong interest from international markets. Some big names that participated include:

Societe Generale – ODI
Goldman Sachs (Singapore) Pte – ODI
Discovery Global Opportunity (Mauritius) Ltd
Authum Infrastructure and Investment
Troo Capital

These powerful institutional investors saw potential in SpiceJet despite its financial struggles, backing the airline with capital that could redefine its future.

What Will SpiceJet Do with Rs 3,000 Crore?

The airline doesn’t plan to sit on its newly acquired cash. According to SpiceJet chairman and managing director Ajay Singh, this influx of capital is the beginning of a transformative phase. SpiceJet is preparing to:

Tackle mounting liabilities: SpiceJet has been grappling with financial issues, from disputes with lessors to technical problems that grounded parts of its fleet. This capital will help it address those challenges.
Restructure leases: In order to stabilize, the airline must renegotiate leases and find better terms for its operations.
Expand its fleet: Perhaps the most exciting part of SpiceJet’s future plans is the revival of its grounded planes and the acquisition of new aircraft. This expansion could help the airline reclaim lost market share.

Financial Struggles and a Path to Recovery

While this financial victory is a welcome relief, SpiceJet’s challenges aren’t over yet. The airline has been dealing with severe cash flow issues, which have been reflected in its shrinking market share. In July 2023, SpiceJet’s domestic market share dropped to 3.1%, and in August, it plummeted further to a record low of 2.3%.

The airline has faced operational hurdles too. For instance, about 150 cabin crew members were placed on Leave Without Pay (LWP), and some flights from Dubai were cancelled due to the fleet’s operational constraints.

However, with this new funding, SpiceJet aims to tackle these problems head-on. Singh has expressed optimism, stating that the airline is determined to “paint the skies red once again.”

The Stock Market Reaction: A Positive Sign

The impact of the SpiceJet QIP was immediately felt in the stock market. As of 10:50 AM on September 23, SpiceJet’s shares were trading 7% higher, reaching Rs 70.80 on the Bombay Stock Exchange (BSE). Over the past year, SpiceJet’s stock has surged by 100%, more than doubling its investors’ capital, whereas the Sensex rose by 28% in the same period.

Even year-to-date, SpiceJet has performed remarkably well, with a 16% rise compared to the 17% rise of Sensex. This impressive market rally highlights that investors are regaining confidence in the airline, especially after the infusion of new capital.

Conclusion

SpiceJet’s successful Rs 3,000 crore QIP could be the lifeline the struggling airline needs to regain its footing. With major institutional backing and plans to address key financial challenges, the airline is set to make a comeback in a fiercely competitive market. However, the road to recovery won’t be without hurdles, but the fresh capital gives SpiceJet a fighting chance to soar high once again.

FAQs:

1.What is a Qualified Institutional Placement (QIP)?

A. A QIP is a way for listed companies to raise capital by selling shares to institutional investors.

2.How much did SpiceJet raise through its QIP?

A. SpiceJet raised Rs 3,000 crore through its QIP, surpassing its initial target of Rs 2,500 crore.

3.Who are the major investors in SpiceJet’s QIP?

A. Major foreign investors include Societe Generale, Goldman Sachs, Discovery Global, Authum Infrastructure, and Troo Capital.

4.How will SpiceJet use the funds?

A. The airline will use the funds to pay off liabilities, restructure leases, and expand its fleet by reviving grounded aircraft and acquiring new ones.