SpiceJet shares fall 6% on profit booking; airline launches ₹3,000 cr QIP

Shares of budget airline SpiceJet fell 6% on Tuesday on profit booking by investors after the company announced to raise up to ₹3,000 crore via qualified institutional placement (QIP) at the floor price of ₹64.79 per share. The company has not officially confirmed the QIP size yet but said the board has approved raising of up to ₹3,000 crore.

"In accordance with the approval of the shareholders of the company, the company may at its discretion offer a discount of not over 5% on the floor price for the Issue. The company will determine the issue price in consultation with the lead managers concerned."

The funds raised via QIP will help the cash-strapped airline to reduce debt and operationalise more planes. The shares of Gurugram-based airline opened a gap down at ₹74.90 on the BSE and fell to the day's low at ₹72.85, down 6.3%. At the current share price of ₹75.30 (11.59 pm), SpiceJet's m-cap stands at ₹5,983.43 crore.

Earlier this month, SpiceJet signed a settlement agreement with Carlyle Aviation Restructuring, under which Carlyle will write off $40.17 million in lease arrears. Carlyle will convert $30 million in lease arrears into SpiceJet equity at ₹100 per share, increasing its stake in the airline. Additionally, it will convert $20 million in lease arrears into compulsorily convertible debentures (CCDs) of SpiceXpress & Logistics. The companies said the partnership between SpiceJet and Carlyle will bolster SpiceJet's financial position. SpiceJet operates a fleet of Boeing 737s & Q-400s.

In a new challenge for the budget airline, the Directorate General of Civil Aviation (DGCA) last month placed it under 'enhanced surveillance', which means it will face more frequent spot checks and night-time monitoring to ensure operational safety.

The DGCA's decision follows a special audit conducted on August 7 and 8, 2024, which revealed several deficiencies in SpiceJet's engineering facilities. The audit's findings, with the airline's ongoing financial difficulties and flight cancellations, supposedly led to this heightened oversight.

Reports say SpiceJet recently had to operate empty flights from Dubai after passengers were unable to check in because of unpaid airport fees. Countering any claims of operational halts, SpiceJet said all flights from Dubai were now running as scheduled.

SpiceJet reported a 19.65% decline in its profit for the June 2024 quarter (Q1 FY25), with earnings falling to ₹158.75 crore from ₹197.58 crore in the same quarter last year. Its revenue fell 14.15%, dropping to ₹1,646.21 crore from ₹1,917.43 crore year-over-year (YoY).

As per the ratings agency ICRA’s latest data, India’s domestic air passenger traffic for August 2024 was estimated at 132.9 lakh, which is higher by 2.3% than 129.9 lakh in July 2024. Further, it witnessed a YoY growth of 7.0%.