India’s second largest low-fare airline SpiceJet Ltd on Friday said its board of directors has decided to issue upto 64.1 million warrants having the option to apply for and be allotted an equivalent number of equity shares of the face value of Rs.10 each to the promoters of the airline.
The move is aimed at arresting the erosion of the company’s net worth following mounting losses, experts said. SpiceJet is controlled by media baron Kalanithi Maran of Sun TV Network Ltd.
The price of these warrants would be determined later as per the capital market regulator’s guidelines, the company said in a filing to BSE.
Shares of SpiceJet closed at Rs.18.60, down 2.11%, while the benchmark BSE Sensex closed up 0.22% at 20,758.49 points.
S.L. Narayanan, group chief financial officer at Sun Group, said the proposed issue of warrants will eventually result in an increase of SpiceJet’s equity share capital by 64.17 million shares.
“The total amount of funds to be infused (including premium) with the proposed issue is estimated to be around Rs.133.34 crore. With this additional funding, the promoters will hold about 58.46% of the expanded capital after the allotment of the new shares,” said Narayanan.
According to Mint Research, the airline has a total liability of Rs.3,192.73 crore as on 30 September and a negative net worth of Rs.603.29 crore.
SpiceJet reported a record loss of Rs.559 crore in the September quarter led by a steep fall in the value of the local currency against the dollar, high aircraft maintenance costs and poor demand.
Its revenue dropped to Rs.1,257.22 crore in the second quarter from Rs.1,701.54 crore in the preceding three months.
SpiceJet has been in talks with private equity funds, Indian conglomerates and foreign airlines for an equity investment over the last one-and-a-half years but has met with little success so far.
In December, SpiceJet’s chief operating officer Sanjiv Kapoor, without disclosing details, said the airline was talking to more than two partners who are interested in an equity stake in SpiceJet.
On 7 January, Mint reported that SpiceJet is set to sign a deal to buy 40 Boeing 737 MAX planes worth a combined $4 billion at list price, according to two people familiar with the development.
The company also informed BSE on Friday that the board of SpiceJet has decided to conduct a postal ballot to seek permission to allot warrants and other business in order to empower the board to borrow in excess of the paid-up capital and free up the company’s reserves.
Source: Auto News in Hindi
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