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Ajay Singh to take over budget airlines SpiceJet from Kalanithi Maran

15 January, 2015

Media baron Kalanithi Maran has decided to give up his majority ownership and management control of budget carrier SpiceJet to its co-founder and former co-promoter Ajay Singh, as per a stock market disclosure.

Although the impending deal has been widely reported, this is the first time the firm has publicly said Ajay Singh is taking over the management control. It has been reported that Singh is partnering US-based JPMorgan Chase to inject fresh fuel in the company.

In a meeting held on January 15, the board of the loss-making carrier approved the proposal put forward by its promoter Maran and his private holding arm KAL Airways Private Limited to transfer the ownership, management and control of the carrier to Ajay Singh.

The transfer of ownership and management control is part of the scheme to restructure and revive the airline. An appropriate application for the same will be made to the Civil Aviation Ministry for which the board has directed to implement and undertake all necessary steps, it said on Thursday.

The firm did not give further details on transaction which is also likely to include fresh cash infusion to revive the budget airlines besides triggering a mandatory open offer.

Maran, who is the promoter of Sun TV Group, owns 53.48 per cent of the company, which is currently worth Rs 534 crore or just under $90 million.

If he sells at least half of this, this would call for a mandatory open offer which could cost as much as $45 million, based on latest market price.

Maran had acquired majority stake in SpiceJet over a period of time starting with a significant minority stake in mid-2010 for Rs 750 crore. He had later pumped in more cash to hike its stake.

The sell-out would translate into a big loss for Maran, who otherwise runs a cash guzzling machine with Sun TV due to its near monopoly in the southern TV entertainment & distribution market. Maran has also been the highest paid executive among the stock listed firms in India, for the past several years.

Ajay Singh along with NRI Bhupendra Kansagra started SpiceJet in 2005 and exited the company in 2010.

The airline is said to have total liabilities of Rs 2,000 crore which include dues to the public sector oil firms and the Airports Authority of India (AAI).

The last time an airline stopped operations under mounting losses was two years ago when Kingfisher shut down.

In the quarter ended on September 30, 2014, SpiceJet reported fifth straight quarter of net loss of Rs 310 crore. The carrier incurred losses in six of the eight preceding quarters. Last time it booked profit was in the quarter ending June 2013.

SpiceJet is the second-largest budget carrier in the country behind IndiGoand and overall the fourth largest carrier by passenger numbers. Competition is intensifying in the domestic aviation sector with the entry of AirAsia and a separate full service airline Vistara, through a JV between Tata Sons and Singapore Airlines.

Shares of SpiceJet closed the day at Rs 18.65, up 3.04 per cent on BSE in a strong Mumbai market on Thursday.

In the recent past ace private investor Rakesh Jhunjhunwala had built up a small stake in the company.

(Edited by Joby Puthuparampil Johnson)


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Ajay Singh to take over budget airlines SpiceJet from Kalanithi Maran

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