SpiceJet's Board of Directors is Considering the Generation of New Funds

By Consultants Review Team Thursday, 07 December 2023

SpiceJet, which has been dealing with a liquidity crunch for several quarters, said on Thursday that its board is evaluating options for raising new capital through the preferential issue of shares or convertible instruments. Following its announcement on the BSE on Thursday morning, SpiceJet's share price increased by 20%.

SpiceJet told the Delhi High Court in November that it was "struggling to stay afloat" after the court ordered the airline to pay its former owner, Kalanithi Maran, back taxes. The airline argued in court that compelling it to make cash payments would affect the involved parties. It emphasized that none of the stakeholders would benefit if the budget airline were to enter insolvency.

The airline announced on Thursday that its board meeting, which was set for Friday to review the second quarter results, had been rescheduled until Monday. IndiGo, India's only other publicly traded airline, presented its second-quarter earnings on November 3. The board of directors of SpiceJet will also discuss the possibility of obtaining new money.

"This is to inform you that the Board of Directors of the Company in its meeting scheduled on December 11, 2023 (Monday) will discuss and consider...options for raising fresh capital through the issue of equity shares and/or convertible securities on a preferential basis, in accordance with the relevant provisions of applicable laws and subject to approval of the shareholders of the Company and receipt of applicable regulatory approvals, as may be required," the company said in a press release.

Since 2018-19, the airline has been losing money, with a net loss of Rs 1,513 crore in 2022-23 and Rs 1,744 crore in 2021-22. The airline achieved a net profit of Rs 197.6 crore in the first quarter of the current fiscal year.

SpiceJet has been experiencing cash flow issues for several quarters. It is also involved in many legal proceedings involving money owing to Maran, the financial services firm Credit Suisse, and lessors. Credit Suisse and SpiceJet have been locked in a legal battle over $24 million in outstanding debts since 2015. Both sides told the Supreme Court in August 2022 that they had reached an agreement. Credit Suisse filed a contempt case against Singh and the airline in March of this year, claiming that they had not met their payment commitments as specified in the settlement terms. Following a Supreme Court order, the airline paid Credit Suisse $1.5 million in September.

Singh's conflict with Maran dates back to 2015, when Maran sold his 58.46% interest in SpiceJet for a pittance of Rs 2. Maran filed a case in the Delhi High Court in 2016, saying that the airline violated their sale agreement by neglecting to provide him with share warrants and preference shares. In response, the court ordered the airline to deposit Rs 579 crore and encouraged both sides to settle the dispute through arbitration in 2017. Maran was awarded Rs 579 crore with interest by an arbitration tribunal in 2018.

On May 29, this year, the High Court ordered SpiceJet to pay Rs 380 crore in interest to Maran. On July 7, however, the Supreme Court denied SpiceJet's appeal for an extension to compensate Maran and his company, Kal Airways. On July 10, Kal Airways stated unequivocally that no "amicable" solution with SpiceJet was possible and asked that the airline comply with the court's decision to pay the interest.


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