Former owner Ajay Singh may step in with investment to save SpiceJet

Ajay Singh, former promoter of troubled airline SpiceJet Ltd, is helping the company move out of its financial crisis. Singh, along with two other international PE investors, is planning to invest around Rs 1,200 crore ($189.36 million), according to various media reports, citing sources.

Singh is in talks with Kalanithi Maran—Sun Group owner and majority shareholder in SpiceJet—to buy a stake in the aviation company. The firm will reveal the final plan on funding on Monday.

Singh along with NRI Bhupendra Kansagra started SpiceJet in 2005 and exited the company in 2010; the airline had Rs 800 crore in cash at that time.

Maran, who currently owns 54 per cent equity stake in the airline, pumped in about Rs 250 crore into the airline this year and has invested a total of around Rs 820 crore in the last three years.

The carrier has also asked banks or other financial institutions to lend up to Rs 600 crore backed by the personal guarantee of Maran.

Singh met civil aviation minister Ashok Gajapathi Raju on Friday and had also met civil aviation secretary V Somasundaran on Thursday for exploring options of investing in the carrier once again.

After the meeting, Raju said, "The airline has a good safety record and they are trying various things to keep going. Our two big interests are safety and consumers and keeping those in mind, we want the airline to continue to fly."

"The Directorate General of Civil Aviation (DGCA) would be asked to allow SpiceJet to sell advance tickets until March 31, 2015. It also said that airport operators would be asked to give SpiceJet 15 days to make payments, while state oil companies would be asked to give credit for up to 15 days," he said.

SpiceJet resumed operations on Thursday after being forced to cancel over 150 flights with oil marketing companies refusing to refuel its planes forcing the budget carrier to pay Rs 3 crore to buy jet fuel. 

The airline has 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, which had liabilities worth around Rs 6,000 crore, 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.

Shares of Spicejet were trading at Rs 15.80, up almost 20 per cent on BSE in a strong Mumbai market on Friday at 2.27 PM.

SpiceJet is the second-largest budget carrier in the country behind IndiGo. But competition is intensifying in the domestic aviation sector with entry of AirAsia and a separate full service airline Vistara, through a JV between Tata Sons and Singapore Airlines. It currently has a market cap of just under Rs 1,000 crore.

Also read:

SpiceJet resumes operation, pays cash to buy jet fuel

Cash-strapped SpiceJet seeks government support to stay afloat

(Edited by Joby Puthuparampil Johnson)

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