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Beleaguered carrier SpiceJet has been approached by foreign airlines seeking to buy a stake as the company tries to turn around. The shares surged the most in three weeks.
The offers are "premature" and SpiceJet is keeping the "dialogue alive" with the foreign airlines, Ajay Singh, who in February acquired a majority stake in SpiceJet, said in an interview on Wednesday. He declined to name the carriers that have approached his company.
"We have offers for a strategic sale, there's no doubt about it," Singh said. "We feel it's a little premature for a strategic sale to be happening here."
Singh rescued SpiceJet after aircraft lessors took away its planes for lack of payment of monthly rentals and the carrier delayed salaries to staff. Singh, who founded the airline in 2005 and then exited the company later, returned in January with an initial investment of Rs 500 crore ($80 million).
The airline is now cutting costs, renegotiating contracts with vendors and is sharing the turnaround plan with the government.
"This was a brand that I created and therefore there was certainly some emotion involved in trying to revive it, but there was more rational business sense as well," Singh said.
"With promoters' funds coming in, and the routes, assets and manpower being rationalised, it appears that SpiceJet is on a recovery path," said Amber Dubey, New Delhi-based partner and head of aerospace and defence at KPMG.
Delay in getting operating permits and rules that prevent new carriers from flying overseas mean global carriers may prefer to pick up a stake in an existing airline, he said.
The airline expects to post profit in the April-June quarter, Chief Administrative Officer G P Gupta said in a separate interview in New Delhi.
Shares of SpiceJet surged as much as 14 per cent, their biggest intraday gain since February 20. The stock has jumped about 80 per cent since December 18, when Singh's interest to invest in the airline was first reported.
Prime Minister Narendra Modi's government is trying to help the airline industry, with $10 billion of accumulated losses over the past seven years, by changing policies. The government is considering easing rules that force local airlines to serve the nation's remote locations despite little demand.
India's government has opened the airline industry for foreign investment in recent years, a move that brought in investments from Etihad Airways PJSC, which bought a stake in Jet Airways India Ltd AirAsia Bhd, the continent's biggest budget airline, and Singapore Airlines Ltd have both started their India operations partnering with the Tata Group.
PREPARING THE GROUND
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The offers are "premature" and SpiceJet is keeping the "dialogue alive" with the foreign airlines, Ajay Singh said
