SpiceJet hives off SpiceXpress; stock jumps

Budget carrier SpiceJet on Monday completed the demerger of its cargo and logistics division 'SpiceXpress' into a separate entity, SpiceXpress and Logistics Pvt Ltd.

The hive off is effective April 1, 2023 and paves the way for SpiceXpress to raise funds independently, the low-cost carrier says in a stock exchange filing.

"The hive off would strengthen SpiceJet's balance sheet, wipe out a substantial portion of the company's negative net worth and unlock significant value for the company and its shareholders," the filing says.

Reacting to the news, shares of SpiceJet rose as much as 2.5% in intraday trade to ₹31.05 apiece on the National Stock Exchange (NSE). This compares with a marginal decline in Indian equity benchmarks on Monday. The BSE Sensex was trading below the 59,000 mark, while the Nifty 50 was trading around the 17,350 level.

The hive off comes at a time when the Ajay Singh-led airline is looking to raise funds to reduce its existing liabilities.

The transfer of cargo business undertaking shall be discharged by SpiceXpress by issuance of securities in the combination of equity shares and compulsorily convertible debentures (CCDs) to SpiceJet for an aggregate amount of ₹2,555.77 crore, the filing says.

"The hive off will not only enable SpiceXpress to raise cash independently, it will significantly reduce SpiceJet's negative net worth. Having restructured over $100 million, outstanding dues to Carlyle Aviation Partner last month, the hive off will further strengthen and deleverage our balance sheet," says Ajay Singh, chairman and managing director, SpiceJet.

"The separation of our cargo and logistics arm is a stepping stone in our growth story which shall unfold in the times to come. SpiceXpress will provide greater and differentiated focus to cargo and logistics business and will allow the possibility of raising capital for the business to accelerate its growth. The decision to hive off SpiceXpress is in sync with our long term business plan and will unlock significant valuation of the logistic business," Singh says.

In February, SpiceJet board had approved the conversion of the airline's outstanding lease liabilities to aircraft lessor Carlyle Aviation Partners into equity. SpiceJet said it will convert shares worth around $29.5 million at a price of ₹48 per equity share. The no-frill carrier's board had also proposed raising fresh capital of up to ₹2,500 crore by issuing securities to qualified institutional buyers.

Net profit of SpiceJet surged 160% year-on-year to ₹110 crore for the quarter ended December 31, 2022, aided by strong performance in both passenger and cargo businesses. Revenue from operations rose 2.5% to ₹2,316.8 crore in the third quarter compared with ₹2,262.6 crore in the corresponding period last fiscal. The airline clocked the highest domestic passenger load factor, the percentage of available seating capacity filled with passengers. Available seat kilometer (ASK), a measure of an airplane's carrying capacity, rose 5%. Yield — the average amount of revenue received per paying passenger flown one kilometre — jumped 21% year-on-year.