Business
Capital infusion could be done in a combination of equity and debt
Updated : Mar 19, 2018, 05:48 AM IST
Former co-owner of budget carrier SpiceJet, Ajay Singh and other investors need to bring in a minimum of $200 million (Rs 1,260 crore) to clean up the mess at the airline, according to a reliable source, who did not want to be named.
This, said the source, would be a combination of equity and debt; "The focus is on equity but there could be debt too of $100 million (Rs 630 crore) with personal guarantee of the current promoters (Kalanithi Maran of Sun Group)".
The potential investors have begun the due diligence process, which is likely to be completely within four weeks. Singh, who has jumped into the pilot's seat, is also looking to raised long-term debt if it could be availed at a concessional rate.
According to those in the know, the investors are likely to pick up the entire 58% stake owned by the existing promoters and Sun Group. Singh, at present, owns less than 5% stake.
"The final transaction has yet to be done. The equity will be picked up by Singh, overseas investors and, maybe even an overseas airline. Nothing has been crystallised as yet," said the sources.
He said the airline's net liabilities stand at around $100 million (Rs 630 crore) as against the figure of Rs 2,100 crore circulating in the market.
"That (Rs 2,100 crore) is the total liabilities. Any business, which is loss-making is seen as a going concern. When auditors calculate its liabilities, they take into consideration both asset-based liabilities, which are not payable, and other liabilities. The net liabilities of the company are $100 million and the remaining are not payable (immediately)," said the source.
He said in case of SpiceJet, most of the debts are asset-based, and the working capital debt is a very small part of it.
The source said the government was keen SpiceJet survived: "The government wants the airline to survive as it wants to keep the positive momentum going. And with all the sentiment about Make-In-India and acche din, it does not want the airline to go belly up. It wants to create a climate of investment. It is supporting the revival (of the airline) but has not given any fiscal support," he said.
And with Singh at the helm of affair, the airline is slowly flying out of the turbulence, beginning with its flight schedules being brought back to normal.
"Our first task is to put the operations back on track. Last week, there were rampant cancellations. Our mission is to normalise the operations. On Sunday, SpiceJet achieved an on-time-performance (OTP) of 95%," said the source.
Next, the airline, is looking to pay off staff salaries on time; "For the years that the airline has been around, employees have always been paid on time. This is the first time that it has been delayed. We want revert to the same regime as before," he said.
The source also hinted at a management change; "With professional investors coming in, there will be change in the key professional positions. The current crisis at the airline is partly because of the current management".
The airline will also be requesting the Directorate General of Civil Aviation (DGCA) to reserve its cancelled slots for it. Earlier this month, the aviation regulator had cancelled 186 of SpiceJet's slots.
Bangalore-based airline consultant Pankaj Pandit said the worst was over for the carrier and it won't be difficult for Singh to get an investor. "They (airline) will easily be able to get an investor at current price of its share," he said.