SpiceJet promoter Ajay Singh is set to reduce his stake in the low-cost airline by over 10% as he aims to raise approximately Rs 3,000 crore.

Despite the stake dilution, Singh will retain his position as the largest shareholder, with his holding expected to drop to around 30-35% after the fundraising, which is anticipated to conclude by September, The Economic Times reported, quoting sources familiar with the matter.

The capital infusion will be facilitated through the issuance of new shares, expanding SpiceJet’s capital base.

Singh, who currently holds a 47.8% stake in the budget airline, has 38.8% of his shares pledged with lenders. However, his stake is projected to increase by 9% later this year after he converts warrants worth Rs 300 crore into equity.

SpiceJet looks to raise funds

SpiceJet has appointed ICICI Securities and JM Financial to oversee the fundraising efforts. Although the airline had previously planned to raise Rs 2,250 crore from a group of 64 investors, only Rs 1,060 crore was secured due to a primary investor withdrawing.

The airline, which has been grappling with severe financial challenges, urgently needs the funds to stabilize operations. SpiceJet has defaulted on payments to vendors, including aircraft lessors, some of whom have filed legal petitions seeking the airline’s bankruptcy.

SpiceJet’s market share has plummeted to under 4%, with only 22 aircraft currently in operation, while over 30 planes remain grounded due to a lack of engines and spare parts.

Despite these setbacks, the airline is optimistic about attracting investors, citing strong demand for air travel in India and its low-cost business model as key factors.

Mounting financial troubles

However, the airline’s financial health remains precarious. SpiceJet’s total liabilities stood at around Rs 9,000 crore as of March 31, 2023, with Rs 2,700 crore owed to aircraft lessors.

The airline has struggled to meet its financial obligations, including delays in paying employee salaries and defaults on provident fund contributions.

Last year, SpiceJet received shareholder approval to raise Rs 2,500 crore through a Qualified Institutional Placement (QIP), but the plan was derailed by the resurgence of Covid-19, which further strained the aviation industry.

Singh has highlighted the challenges faced by the airline, including halted Boeing 737 Max deliveries, the impact of the pandemic, and a sharp rise in jet fuel prices.

Despite these hurdles, SpiceJet remains hopeful that the proposed fundraising will provide the much-needed capital to navigate through its current challenges and restore operational stability.