SpiceJet to raise $60 million to consolidate

Low-cost carrier SpiceJet is close to raising around $60 million to strengthen its operations over the next two years. Sources in SpiceJet confirmed that the company is in advanced talks with several private equity players but the structure of the deal has not yet been finalised. It could not be ascertained how much equity stake the company would dilute to raise the additional funds. When contacted, SpiceJet CEO Siddhanta Sharma confirmed that the airline is looking at a fresh round of funding. SpiceJet had raised $70 million through an FCCB, listed in the Luxembourg Stock Exchange last December. Market analysts expect SpiceJet to dilute around 4-5% stake for the fresh equity infusion.

Last December, Istithmar PJSC, the private equity arm of the government of Dubai, picked up 3.3% stake in the company for around $50 million. Among those who subscribed to the FCCB include investment bank Goldman Sach. The low-cost carrier is in the process of expanding its fleet with another seven new aircraft slated to join the network over the next one year. At present, it has nine-aircraft strong fleet of Boeing 737-800, with one more likely to join the fleet in the next week or so. Last year, it had placed orders for 20 Boeing 737-800/900ER valued at a list price of $1.1 billion. In August this year, SpiceJet entered into a sale-and-lease back agreement covering 16 brand new aircraft with Babcock & Brown Aircraft Management and Nomura Babcock & Brown. SpiceJet currently flies to Delhi, Hyderabad, Ahmedabad, Pune, Jaipur, Mumbai, Kolkata, Bangalore, Chennai, Goa, Guwahati, Jammu, Srinagar and Varanasi.

With no major airline start-ups taking wings in 2007, industry analysts expect carriers to focus on consolidating their operations and cut down the losses. Indian carriers are likely to end the fiscal with losses worth Rs 2,500 crore. Sources said several airlines, including Vijay Mallya’s Kingfisher and Wadia group-promoted Go Airways are on the look out for funds to expand operations. Air Deccan recently sold 1.96% stake to UK-based Investec Bank for around Rs 30 crore. Instead of opening new routes, established low-cost carriers are likely to consolidate their operations and introduce more flights on existing routes in 2007. Only new start-ups such as IndiGo would add new stations to improve their national network.

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