SpiceJet to raise $60 million through stake sale

Budget airline SpiceJet plans to sell equity to raise $60 million to upgrade technology besides improving reservation, customer support and airport facilities, a top official said. The company was in talks with Indian and foreign strategic investors for a "plain-vanilla equity sale," and "due diligence for the deal" would be over by end-December, Chairman Siddhanta Sharma said. "This will not be for fleet expansion. We will be adding to our spares stock ... this cash would also help to tide over a lean season," Sharma said, but declined to say how much equity would the company sell. Spicejet has already raised money twice -- via a $80 million overseas convertible bond issue and a $12.5 million stake sale to Dubai investment firm Istithmar -- since it began operations in May 2005, officials said. The airline's revenues for the business year ending May crossed 4.53 billion rupees and it said in August that it hoped for a 100 percent annual growth in sales. Now, the company plans to switch to April-March accounting cycle and is cutting short the current year. Sharma didn't give a fresh revenue forecast.

Sharma said the airline was also ramping up operations in ancillary services, which could rise to about a tenth of total revenue in 2007/08 from an expected 7 percent this year. "We are in the process of forging tie-ups to provide car rental services, travel insurance and are also thinking about inflight shopping," Sharma said. The company also sees yields or revenue per seat rising by 10 percent in the coming December-February quarter due to lower fuel costs, higher economies of scale with more aircraft and fewer discount seats. The company had cut low-fare seats by 15 for the forthcoming holiday season, he said. Spicejet earlier offered 60 low-fare seats on each flight. Fuel costs, which ruled at 46 percent of revenue at the end of September were now about 39 percent, he added. Spicejet hoped its share in India's increasingly crowded airline market would grow to 11 percent over the next 12 months from 8 percent now, Sharma said.

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