Shares of SpiceJet plunged over 5% on February 14 following reports from CNBC-TV18 indicating investor concerns regarding the airline’s funding situation.
According to sources cited by CNBC-TV18, SpiceJet is facing ongoing liquidity challenges, leading to delays in salary payments, TDS settlements, and EPFO deposits for many employees due to insufficient funds.
In the previous month, SpiceJet had announced the completion of the first tranche of a capital infusion worth Rs 744 crore through preferential allotment of securities. The airline’s Board of Directors, in a meeting held on January 25, had approved the allotment of 5.55 crore equity shares to 54 subscribers on a preferential basis. Additionally, the Board sanctioned the allotment of 9.33 crore warrants to Elara India Opportunities Fund Limited and Silver Stallion Limited, granting subscribers the option to apply for an equivalent number of equity shares.
Responding to the reports, SpiceJet’s stock reacted negatively, trading 5.1% lower at Rs 62.25 on the BSE as of 1130 hours on Wednesday. The airline’s shares have ranged between a 52-week low of Rs 22.65 and a high of Rs 77.5.
CNBC-TV18 also highlighted concerns that lessors are hesitant to extend aircraft leases due to payment issues. Currently, SpiceJet operates around 30 aircraft, including eight that are wet-leased from foreign carriers with crew and pilots.
A spokesperson for SpiceJet informed CNBC-TV18 that salaries for over 75% of staff for January 2024 have been disbursed, and processing for the remaining is underway. The spokesperson assured that pension fund dues would be deposited in the near future, with depositing PF dues being a top priority.
Earlier this week, SpiceJet announced plans to downsize its workforce, targeting around 1,400 employees, or 10-15% of its total staff strength, for layoffs.
The spokesperson added, “As part of our turnaround and cost-cutting strategy, following the recent fund infusion, SpiceJet has initiated several measures, including manpower rationalization, aimed at achieving profitable growth and positioning ourselves to capitalize on the opportunities in the Indian aviation industry. Through this initiative alone, we anticipate an annual saving of up to Rs 100 crore.”
SpiceJet managed to reduce its net loss to Rs 428 crore in Q2FY24 from Rs 835 crore in Q2FY23.
