Mumbai-based entrepreneur Harihara Mahapatra and his wife Preeti have announced plans to invest Rs 1,100 crore in SpiceJet, acquiring a substantial 19% stake in the airline. This investment comes at a crucial time for SpiceJet, which has been dealing with financial challenges. Other investors, including Aries Opportunities Fund and Elara Capital, are also part of the funding initiative, securing holdings of 3% and 8%, respectively, post the conversion of warrants.
SpiceJet has recently revealed a much-needed lifeline as various funds and high-net-worth individuals have committed to investing Rs 2,254 crore. This infusion is planned through the issuance of up to 130 million convertible warrants and 320.8 million fresh equity shares. Upon shareholder approval for the issuance of equity and warrants, the current shareholding of promoter Ajay Singh in the airline is expected to decrease from 56.49% to a minimum of 38.55%.
Harihara Mahapatra and his wife serve as promoters of Mahapatra Universal Limited, a conglomerate based in Mumbai engaged in diverse sectors such as real estate, infrastructure, consulting, consumer, and retail. In the past, Preeti Mahapatra contested as an independent candidate in the 2016 Rajya Sabha election, supported by the Bharatiya Janata Party against Congress leader Kapil Sibal.
The allocated funds from the recent investments in SpiceJet, amounting to Rs 2,241.5 crore, will be utilized to address statutory obligations, outstanding dues with creditors, reintegrate grounded aircraft, acquire new planes, cover aviation turbine fuel costs, pay employee salaries, and meet general corporate requirements.
The fundraising initiative is expected to significantly reduce the airline’s interest burden and help in restructuring its short-term liability of Rs 6,000 crore, addressing outstanding statutory dues and other taxes. SpiceJet aims to engage in discussions with Boeing for the resumption of the induction of over 200 new 737 Max aircraft, aligning with the airline’s strategy to address its capital needs.
Despite the investment infusion, SpiceJet continues to face operational challenges as at least two out of every five of its planes remain grounded. Concerns have been raised about the lack of transparency in the airline’s operational reporting.
SpiceJet’s operational performance offers a mixed picture, with the airline struggling to increase its market share despite demonstrating growth in passenger yield. 40% of the airline’s fleet remains grounded, presenting operational challenges.
The investment from Harihara Mahapatra and other investors marks a turning point for SpiceJet. As the airline navigates financial and operational challenges, this investment positions it for renewed strength and stability in the aviation sector. However, SpiceJet must address its operational challenges to regain market share and enhance transparency in its reporting.
Historically, SpiceJet has faced financial constraints and operational challenges, which have affected its market position. With the recent investment infusion, the airline is poised to tackle these issues and embark on a new path of growth and stability in the aviation industry.
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