SpiceJet Q1 preview: Analysts eye liquidity measures, growth in cargo biz

SpiceJet Q1 result: SpiceJet currently sits on a debt pile of approximately Rs 3,000-3,500 crore, of which Rs 1,000 crore is on the balance sheet and Rs 2,000-2,500 crore is from the deferred leases

SpiceJet Q1 result: Given that budget carrier SpiceJet, as per analysts' expectations, is most likely report net loss for April-June quarter of FY22 (Q1FY22), all eyes are now on the airline’s fundraising plans as well as growth in the cargo business during the Covid-hit period, when it reports its Q1 result on Friday, August 13.

“Same as IndiGo, the key focus would be around its liquidity. The company has almost no liquidity and ended the quarter to March (Q4FY21) with free cash of only Rs 35.5 crore and restricted cash of Rs 140 crore. However, the similar kind of situation has been there for the last 18 months and yet, the company has not only managed to survive, but it has increased the size of its cargo operations,” noted analysts at HSBC in a results preview report.

Cash and debt position

Analysts believe the Ajay Singh-controlled airline has several avenues to raise fresh liquidity. To begin with, it is planning to sell its stake in the cargo business. Further, it is also expecting compensation from Boeing for the grounded Max 737 planes. In addition, the board of SpiceJet has also approved to raise Rs 2,500 crore via qualified institutional placement (QIP).

“We would like to understand how the company plans to strengthen its balance sheet and improve its equity position, which was negative Rs 2,600 crore at the end of March 2021. We would expect some discussions around the trading environment in passenger and cargo business and its growth plan for the cargo business, network plans, update on international operations and finally the cost evolution over FY22, especially employee cost as the company has launched flexible pay (work and pay,” said HSBC’s report.

SpiceJet currently sits on a debt pile of approximately Rs 3,000-3,500 crore, of which Rs 1,000 crore is on the balance sheet and Rs 2,000-2,500 crore is from the deferred leases.  

Earnings projection

Analysts expect SpiceJet’s net loss to widen sequentially in Q1FY22 mainly due to sharp fall in traffic, rise in aviation turbine fuel (ATF) prices and rupee depreciation.

Those at HSBC, for instance, expect SpiceJet to report a net loss of Rs 740 crore for the quarter, higher than net loss of Rs 593.4 crore reported in the June quarter of FY21 (Q1FY21) and Rs 235 crore incurred in Q4FY21.

“We forecast yield per revenue passenger kilometre (RPK) to decline by 35.8 per cent YoY since the yield in Q1 last year was positively impacted by charter operations and international operations under bubble agreements. However, we think the revenue per available seat kilometre (RASK) would be down by 38 per cent due to the lower load factor,” it said in its report.

However, the airline’s revenue, it said, may soar 105 per cent on year to Rs 1,066.2 crore from Rs 514.6 crore. Sequentially, though, it may plunge from Rs 1,877.1 crore.

On the other hand, Centrum Broking has pegged the net loss at Rs 490 crore, factoring in forex mark-to-market (MTM) loss of Rs 150 crore in Q1FY22 compared with forex gain of Rs 23.8 crore in Q4FY21 due to depreciation in rupee against the US dollar.

“Having said that, we expect the cargo performance to improve even further in Q1FY22. We have factored cargo revenue of Rs 610 crore, given the strong cargo demand and SpiceJet’s focus to grow the business. We estimate adjusted RASK (ex-freighter, finance income and 737 Max claim accrual) at Rs 3.11 (flat QoQ). We expect revenue to decline 59 per cent QoQ to Rs 1,334.2 crore with Ebitdar of Rs10 crore in Q1FY22,” it said.

Meanwhile, the stock has lost 37 per cent from its 52-week high of Rs 108 per share, hit on December 11, 2020. So far in the current calendar year, it has slipped 28.4 per cent on the BSE as against a 14.5 per cent rally in the benchmark S&P BSE Sensex.