Kalanithi Maran to pump Rs 100 cr into SpiceJet

Promoters stake will go up by 5% to 48.59% Airline better placed than rivals, says chief executive

SpiceJet promoter Kalanithi Maran will infuse about Rs 100 crore equity in the airline, a month after its auditor raised concerns about its eroding net worth. This is the second round of equity infusion by Maran in five months. With this, Maran’s stake will go up by five per cent to 48.59 per cent.

SpiceJet is expanding fast, having logged a 29 per cent growth in traffic and 41 per cent rise in revenue in the third quarter of 2011-12. However, the 2004-founded airline posted a loss of Rs 39 crore due to a rise in operating costs. The fresh round of infusion is expected to aid the Gurgaon-headquartered airline’s expansion as it hopes to induct 10 planes this year.

“The equity infusion will be completed by the first week of April,” said SpiceJet chief executive officer Neil Mills, following the airline board's decision to allot fresh shares on Friday. “It is a clear demonstration of promoter interest.”

Maran, who took over the airline in 2010, will get 42.9 million additional shares in lieu of investment. The company, he said, was looking at other options to raise capital, including debt, but no decision had been taken it. “At this point of time, we are comfortable,” he said. As on December 31, the airline had a total share capital of Rs 441 crore.

Mills said SpiceJet was operating 270 flights. “We will continue to expand in regional as wel as international routes,” he said. He added the airline will induct 10 planes this year. It will be a mix of turbo prop Bombardier Q400s and Boeing 737s.

Since last September, SpiceJet has been focussing on expanding in regional routes using the turbo prop planes. Along with IndiGo, it is the only other airline which will add significant capacity this year. However, rising fuel prices and competitive pressures have led to underpricing of tickets. Even so, Mills seemed confident about a turnaround.

SpiceJet had a 16.3 per cent market share as of January, making it the country’s fourth-largest carrier among the seven and the second-largest among the no-frills airlines.

“We are much better placed than most of the other competitors,” Mills said. “The government allowing direct import of aviation turbine fuel is a positive sign. We are actively considering it. Oil prices affects every body. It is an industry issue.”

SpiceJet auditors S R Batliboi & Associates had observed in their report last month that the company’s accumulated losses of Rs 1,077.81 crore had eroded the airline’s net worth. This indicated the existence of a material uncertainty that may cast doubt about the company’s ability to continue as a going concern. SpiceJet, however, disputed the auditor observations stating that its net worth had actually increased following the Rs 130-crore equity infusion last September.