The policy climate for the Indian Aviation sector couldn’t be better than it is now. While the government should be lauded for the quick policy action to save the third airline from closing, there are many questions that needs to be answered by the regulator – SEBI, which has been watching the whole episode from the sidelines. It is a known fact that SpiceJet has been looking for a White Knight for some time - foreign airlines to PE players were in talks to infuse equity into the ailing airline. Unlike other businessmen, the Maran may have been smart enough to realize that when losses mount and it is difficult to recoup losses, it is better to cut your losses. And that's what they have done; they have transferred the ownership and control to Ajay Singh and possibly to a consortium of investors. SpiceJet released a statement post the January 15 board meeting which stated: “SpiceJet Ltd has informed BSE that the Board of Directors of the Company at its meeting held on January 15, 2015, inter-alia, has taken on record the proposal of the principal shareholder and Promoter, Mr. Kalanithi Maran and KAL Airways Private Limited to transfer the ownership, management and control of the Company to Mr. Ajay Singh pursuant to a ‘Scheme of Reconstruction and Revival for the takeover of ownership, management and control of SpiceJet Limited’ to be filed before the Competent Authority, the Ministry of Civil Aviation, Government of India.The Board has further directed the Company to take further steps to implement and undertake all necessary steps including to make the appropriate application before the Ministry of Civil Aviation, Government of India for seeking approval of the ‘Scheme of Reconstruction and Revival for the takeover of ownership, management and control of SpiceJet Limited’ ” So, the first question that comes up – What are the contours of the stake sale to Ajay Singh?
While the Marans have decided to exit the Airlines, there are no details on the contours of the transfer of ownership/control. How much Maran’s have been paid to exit & what is the cost of acquisition of Maran’s shareholding (58.46 percent) in SpiceJet for Ajay Singh and investors?
SpiceJet disclosed it will be filing the revival package to the competent authority for approval. While we are not sure whether the same has been filed with the stock exchanges and SEBI as well, one thing is clear the board of SpiceJet should have informed the minority shareholders the revival plan for the ailing company. There have been, no queries that has been raised by the stock exchanges seeking details of the revival plan for the airline. Even if one were to give a benefit of doubt to the company, on the assumption that revival plan will be a shifting goal post till it is finally approved by the competent authority (Ministry of Civil Aviation & DGCA). The company should have disclosed the same post approval came through. On January 23, the company announced, “SpiceJet Ltd has informed BSE that in furtherance of the earlier intimation dated January 15, 2015, the Company has on January 22, 2015, received the approval of the Competent Authority, the Ministry of Civil Aviation, Government of India for the ‘Scheme of Reconstruction and Revival for the takeover of ownership, management and control of SpiceJet Limited’ by Mr. Ajay Singh in accordance with the application made by the Company.” If the revival plan has been approved by the competent authority, why hasn’t the board of Spicejet which was chaired by the Maran, shared the details of this revival and reconstruction plan with the minority shareholders?
The revival details are still not known till the time the Marans decided to step down from the board on Jan 29th and Ajay Singh taking control of the airline. There are many questions on the compensation that is being paid to take control of the airline. While it is not exactly known, how much Ajay Singh/investors paid for the stake acquisition, there could be a possibility that some cost of that exit is going to be borne by the company/Airline. SpiceJet board which met on January 29, informed the exchange that – Marans/Kal Airways to transfer ownership/control to Ajay Singh. Ajay Singh to acquire 58.46 percent in SpiceJet from Promoters i.e. 350,428,758 shares.
These shares based on January 29 closing price is valued at Rs 764 crore.
-- SpiceJet to create, offer, issue and allot Non-convertible Cumulative Redeemable Preference Shares i.e. 3.75m NC-CRPS of Rs 1000 each valued at Rs 375 crore. These will be allotted to Kalanithi Maran/Kal Airways on preferential basis.
Now there is no clarity whether Marans are going subscribe to NC-CRPS to infuse money into the airline or whether their compensation or part compensation has been converted into NC-CRPS valued at Rs 375 crores. If it is so, then the burden is shifted from the investor to the company. My guess, Maran’s who may have received compensation for the ownership transfer, will plough back this amount to subscribe to the NC-CRPS and redeem the same at a future date. But, this is again a speculation.
-- To issue/allot securities convertible into equity valued at Rs 1500 crore.
This is the most important portion of the deal – the much needed capital infusion. How is it going to take place and who are the investors who will double the current value of the company in the next 12-18 months?
SpiceJet Board will be seeking shareholder nod for these board resolutions, one can only hope the explanation in the postal ballot answer all questions. If the promoter is provided an exit, then why shouldn’t the minority shareholder get one i.e. via open offer? So far there is nothing that has been shared with the shareholders that should possibly prompt SEBI to exempt Ajay Singh & investors from open offer.
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