Paramount Airways eyes SpiceJet

The Chennai-based all business class airline Paramount Airways, promoted by the diminutive M Thiagarajan has started to bare its fangs. A few days after it was reported that Paramount is in talks to acquire a controlling stake in Jeh Wadia’s Go Air, sources say Thiagarajan has now set his sight on Delhi-based low cost carrier SpiceJet. This, sources said, is because the Wadia family is undecided on whether or not they ought to let go of control over Go Air. The Wadia-promoted airline’s official line is that they have no intentions to exit. Sources at Paramount said that the airline has reached an informal agreement with some of Spice Jet’s shareholders who are keen to exit the airline. Once, Paramount acquires 26% in Spice Jet, it will make an open offer for another 20%. Sources said this investment may need at least Rs 500 crore. This values the Delhi-based Spice Jet in the region of Rs 1,000 crore.

On SpiceJet’s part, a spokesperson for the airline said ‘‘SpiceJet is one of the best funded airlines in the country with large cash reserves...Our financial strength can be gauged from the fact that we have recently placed orders for 10 Boeing 737-800 at a cost of $700 million at list price.’’ Added Khaled Al Khamda, vice chairman, Istithmar Holdings, a Dubai-based private equity player with investments in SpiceJet, ‘‘I am not aware of Paramount interest in buying 26% in Spice Jet; nor are we in a dialogue with any third parties over this issue.’’ Sources at Paramount, however, stuck to their stand. They pointed out that close to 62% of Spice Jet’s shares are held by financial institutions. Each of these institutions hold small stakes of around 3-5% in the airline. Apparently, the airline has been talking with a clutch of these investors and are hoping to complete the transaction by July. ‘‘Once the due diligence is completed by the end of this month, the deal should come through, unless the premiums on the share price goes beyond expectations,’’ they added.

Thiagarajan remained unavailable for comment. According to the plan, Paramount would acquire the shares in block deals. The stock price of SpiceJet closed at Rs 59.65 at the BSE on Monday, up by 3.83% over its previous close. Spice Jet is listed on the domestic stock markets with the Kansagara family, promoters of the airline, holding around 12%. Dubai-based private equity fund Istithmar also has a considerable stake in the airline, while the Tata group holds nearly 10%. ‘‘All these stakeholders, including the promoters have a lock-in period until next February. Both the promoters and the Tatas have evinced an interest to exit the company after the lock-in period is completed. This fits into Paramounts strategy as it can up its stake gradually,’’ the source said. Paramount will primarily fund the acquisiton through internal accruals.

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