SpiceJet sees positive net worth by fiscal end

SpiceJet, the budget carrier, is hopeful of becoming net-worth positive by the end of this fiscal.

The airline, one of the few domestic carriers to report profit for the fiscal 2010, currently has a negative net worth of $80 million because of foreign currency convertible bond (FCCB) investment by two investors — Wilbur Ross & Co and the Dubai government’s investment arm Isthitmar.

Chief executive officer Sanjay Aggarwal told DNA Money, “By fiscal 2011 end, SpiceJet is looking at a positive net worth. FCCBs - by Ross and Isthitmar - will have to be converted or redeemed latest by December 2010.”

As of now, Wilbur Ross’ subscription stands at 125 million shares at an investment of $68 million whereas the Isthitmar’s stake (which was higher earlier) now stands at 22 million shares for $12 million.

In the meantime, the profitable low-cost carrier has taken an enabling permission from the board of directors to raise $75 million through fresh issue of shares.

Aggarwal said that though there was no pressing need for this fund raising—there is already Rs 450 crore cash on SpieJet’s books—the permission will allow the airline flexibility to raise funds through different routes.

The board has permitted use of American Depositary Receipts, Global Depository Receipts and qualified institutional placement methods apart from the earlier route of preferential allotments to raise this money.

The airline’s fundraising coincides with some of its strategic investors separately talking to Indian companies and financial institutions to exit from SpiceJet.

While he declined to answer questions on this issue (the Anil Ambani Group and Sun TV’s Maran were believed to be in the race), Aggarwal acknowledged that currently also, promoter shareholding in the airline is “low”.

“Yes, it (promoter stake) is low but then we do not have a majority owner and this has more benefits than drawbacks. We will issue fresh shares to raise funds and consequently promoter equity may go down further but the company’s cash position will improve.”

SpiceJet has received permissions to fly to three cities abroad — Dhaka, Kathmandu and Male