SpiceJet promoter Ajay Singh plans to sell more than 10% of his stake in the low-cost airline in order to generate around Rs 3,000 crore.

Despite the stake dilution, Singh will remain the top shareholder, with his ownership projected to fall to approximately 30-35% following the fundraising, which is slated to end in September, according to the reports.

The capital injection will be eased by the issue of additional shares, therefore boosting SpiceJet's capital base.

Singh presently owns 47.8% of the budget airline and has committed 38.8% of his shares to lenders. However, his share is expected to rise by 9% later this year when he converts warrants worth Rs 300 crore into stock.

SpiceJet aims to raise fund

SpiceJet has chosen ICICI Securities and JM Financial to supervise its fundraising operations. Although the airline had expected to raise Rs 2,250 crore from a consortium of 64 investors, only Rs 1,060 crore was obtained owing to a main investor's withdrawal.

The airline, which has been experiencing serious financial difficulties, urgently requires funding to sustain operations. SpiceJet has failed to make payments to vendors, including aircraft lessors, who have launched court applications to force the airline into bankruptcy.

SpiceJet's market share has dropped to less than 4%, with only 22 aircraft now in operation and over 30 jets grounded owing to a lack of engines and spare parts.

Despite these challenges, the airline remains confident about recruiting investors, citing the growing demand for air travel in India and its low-cost business strategy as significant drivers.

Increasing financial difficulties

Nonetheless, the airline's financial situation remains fragile. SpiceJet's overall liabilities as of March 31, 2023 were about Rs 9,000 crore, including Rs 2,700 crore payable to aircraft lessors.

The airline has failed to satisfy its financial responsibilities, including payroll delays and failure to make provident fund contributions.

SpiceJet gained shareholder permission last year to finance Rs 2,500 crore through a Qualified Institutional Placement (QIP), but the plan was stalled by the reappearance of Covid-19, which put further strain on the aviation industry.

Singh has underlined the airline's issues, which include stalled Boeing 737 Max deliveries, the impact of the pandemic, and a dramatic increase in jet fuel prices. Despite these obstacles, SpiceJet is optimistic that the proposed financing would give the necessary funds to overcome its present problems and restore operational stability.