"Tatas free to raise stake", SpiceJet

Budget carrier SpiceJet has left the door open for the Tatas to increase their stake in the airline. “It is totally up to the Tatas how they go about it in future,” Bhulo Kansagra, SpiceJet’s director and one of its promoters, said when asked whether the Tatas would be raising their stake in the airline. The Tatas have picked up a 7.5 per cent stake in SpiceJet for over $17.2 million. SpiceJet announced it had received proposals totalling $118 million from the Tatas, the Texas Pacific group and Goldman Sachs. Major offers received by the company included $1.2 million from Tata Investments Corporation Ltd, $16 million from Ewarts Investments Ltd (an investment company of the Tata group), $30 million from the Texas Pacific group (which constitutes 11 per cent of the equity), $25 million from Istithmar PJSC and $5 million from Goldman Sachs. It also received an offer of $15 million from BNP Paribas. A meeting of the company’s shareholders was held to consider these proposals.

The company intends to issue equity on a preferential basis for approximately $80 million at a price of Rs 51.50 a share. SpiceJet shares closed at Rs 54.25, a fall of 6.47 per cent over yesterday’s close of Rs 58. The proposals will be placed for shareholders’ approval at the next meeting, scheduled to take place on January 11. With this move, the shareholding of the existing promoters will fall from 44 per cent to 35 per cent. Ajay Singh, director of SpiceJet, pointed out that the response clearly showed that investors had full faith in the Indian airline industry, contrary to what many had suggested. He also said Spice Jet had lower losses than the competition and based on available figures, its costs were 40 per cent lower than Jet Airways and 15 per cent less than Air Deccan. SpiceJet hopes to break even in the next financial year.

On the Tata investment Singh said, “We hope the Tatas will give us managerial expertise and we will ask them to participate. However, they will not have board representation yet.” The fresh infusion of cash will be used in expanding the airline’s fleet, which will have 10 aircraft by the end of December. It will induct another 7-8 aircraft next year and 10 more in 2008. Till then it hopes to go in for leasing rather than acquisition of aircraft. Underlining the importance of receiving investment from the Tatas, the airline’s executives said the Tatas’ expertise in aviation would come in handy for them. They announced that SpiceJet recorded a Rs 50 crore profit on earnings before interest, taxes, depreciation and amortisation (EBITDA) in its first year of operation.

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