Kalanithi Maran-controlled Spicejet Airlines expanded its authorized share capital on Thursday, enabling the loss-making Airline to raise more funds. The Airline, which has been looking for an investor, has also decided to allot as many as 189 million warrants convertible into an equivalent number of equity shares, in various tranches, to the promoters of the company and Sun Group. The Maran family has been pumping funds into the Airline in small instalments every fiscal according to rules prescribed by the market regulator. While Spicejet Airlines overtook bigger rival Jet Airways (India) Ltd to become the number two Airline last week, the Airline is still finding it difficult to draw investors. S.L. Narayanan, group chief financial officer at Sun Group, explains the road ahead for Spicejet Airlines. Edited excerpts:
Why are the promoters still pumping money into Spicejet Airlines?
We continue to believe in the Indian Aviation story and we think Spicejet Airlines has an important place in it. Despite reduction in capacity in the most recent quarter ended 30 June, we have maintained our gross revenue, which is a big achievement in itself. And going by our July 2014 load factor data and the strong market share gains we recorded, there is indeed an interesting story that needs to be told. The total amount invested by the promoters is about Rs.1,300 crore split into approximately Rs.750 crore paid to the exiting shareholders in 2010 and another Rs.550 crore invested as fresh equity post October 2010 till date.
Promoters are investing further.
It was unfortunate that last year's economic conditions hit us really hard, but we are poised for a strong rebound in the coming months. The promoters have once again demonstrated their faith in the Airline and will subscribe to a fresh issue of 18.91 crore warrants to be priced based on the Sebi formula for preferential issues. We think this will be aggregating to Rs.312 crore approximately. These warrants will convert to equity shares in two tranches, initially in April 2015 and again in April 2016.
Looking back, do you feel that buying Spicejet Airlines was a wrong decision?
Not at all. We have seen a healthy growth in passenger traffic, about 8% up in the quarter ended 30 June 2014, over the previous year. Given the low penetration, I believe the civil Aviation sector will see even more impressive growth in the years to come, on the back of higher disposable incomes and greater prospect of upselling due to the narrowing of price differentials between train tickets and Air fares.
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