SpiceJet plans to raise funds from private equity firms

Said to be in talks with Blackstone and Bain Capital, among others

Low-cost carrier SpiceJet Ltd is planning to raise funds from private equity (PE) companies such as The Blackstone Group and Bain Capital, and other potential investors including foreign airlines. “Various investors, including some PE funds, have approached SpiceJet, and we are in talks with them. As of now, we have not finalised any deal, but if everything goes well, we may enter into a mutually beneficial deal,” said a SpiceJet spokesperson, while refusing to name any of the potential investors.

Market sources, however, said some of the PE players interested in the budget airline include Blackstone, Bain Capital and KKR.

Attempts to talk to executives from the PE funds were not successful. Blackstone and KKR responded to email queries sent by Business Standard, offering “no comments” on the issue. Questions emailed to the officials of Bain Capital remained unanswered till the time of filing the story.

The SpiceJet spokesperson also refused to comment on how much money the airline would raise or how much stake will be diluted.

As on March 31, 2012, promoters’ holding in the airline was 43.5 per cent, in which Kalanithi Maran’s Kal Airways Pvt Ltd and Anil Ambani-promoted Reliance Capital Ltd held 35.4 per cent and 5.7 per cent, respectively, while the rest was with Maran.

The promoters infused Rs 100 crore into the airline in April, taking their total holding to 49 per cent. Details on the new break-up of promoters’ stake are not available. In October-November 2011, the promoters had infused Rs 130 crore into SpiceJet.

Commenting on a possible investment by foreign carriers, the airline's spokesperson said: “Some foreign carriers have expressed interest in picking up stakes in SpiceJet if the government changes its policy in this regard.”

At present, foreign carriers are not allowed to pick up stake in India’s domestic airlines.

The development comes at a time when analysts come up with reports, stating the airline could turn profitable in the current financial year.

“We believe the industry is witnessing a structural change, where airline companies have increased their ticket prices and competition has reduced to a certain extent,” Angel Broking said in a recent report.

“Load factors have also been improving for all airlines post-Kingfisher’s capacity reduction. We expect SpiceJet to report 80 per cent plus load factor in first quarter of 2013 and report profit in the same quarter. With the company’s expected fuel import to start from July 2012, we expect its profit margin to further improve from first quarter fiscal 2013,” the report said.

Added the airline spokesperson:“We expect to get the first shipment of aviation fuel imported directly from overseas before the end of July. This move will help in reducing airline’s fuel bill.”

SpiceJet currently has a fleet of 34 Boeing and seven Bombardier aircraft.

The company will also add three Boeing and four Bombardier aircraft by the end of the current financial year. In 2013-14, the company will add five Boeing aircraft and three Bombardiers.

By the end of the next financial year, the total tally would be 41 Boeings and 15 Bombardiers, as per the current expansion plans.