SpiceJet (SG, Delhi International) is in talks with several private equity funds as it looks to raise cash by separating SpiceXpress & Logistics, its cargo division, from the mainline business and selling shares in it, sources at the airline told India’s Business Standard newspaper.
While sources had indicated previously that the carrier had hoped the business would be valued at USD1 billion, on August 17, an independent valuation put it at INR25.56 billion rupees (USD344 million).
SpiceJet is reportedly seeking shareholder approval by postal ballot to complete the process via a qualified institutional placement (QIP), a capital-raising tool used in India, a comparatively speedy method of private placement in which a listed company issues shares to a specific entity.
Potential investors have stressed to SpiceJet that the cargo business must be at arm’s length from the loss-making passenger business, or “ring-fenced” from it, as one source put it.
The cargo subsidiary has applied to the Ministry of Civil Aviation for a no-objection certificate to launch its own scheduled air operations, a sign that it will also have its own air operator’s certificate (AOC). The airline has said it expects SpiceXpress to operate as a separate entity on or around October 1.
“A stake sale in cargo can get good funding for the airline as the freighter business has remained on an upswing despite a lot of belly capacity coming back. They are seeking a premium based on the assumption that if with a 5% market share the company can earn INR10 billion [USD344 million] a quarter, they can double it in the next year,” a banker close to the negotiations told Business Standard.
