The
promoter will use a combination of his shares in the listed company and equity that will be allocated to him as part of a planned hive-off of his airline’s cargo business as security to raise about $300 million. This will be his personal contribution to the funding vehicle that will bid for the government’s 100% shareholding in Air India.
Singh will maintain a minimum 26% shareholding in the SPV. The two US-based funds are likely to contribute $700 million to it. Singh may offload part of his stake in SpiceJet’s cargo unit through the offer for sale (OFS) route once the unit is listed.
However, the people cited above cautioned that the plans are fluid and the final funding arrangement could see some tweaks.
On June 30, SpiceJet informed stock exchanges about its plan to turn the cargo business of the airline into a separate entity. This is subject to shareholder approval. The government has set an August third week deadline for submission of financial bids for the state-owned carrier. Air India’s 100% stake in low-fare carrier Air India Express and 50% in a cargo and ground handling joint venture with Singapore’s SATS are also included in the sale.
Singh owns nearly 60% of SpiceJet, as per the latest available disclosures. However, over a third of his stake is encumbered. The SpiceJet scrip closed at Rs 80 on Thursday, giving the company a market capitalisation of Rs 4,850 crore, pegging the value of Singh’s holding at Rs 2,900 crore.
Bidders will have to quote an enterprise value for Air India when they eventually submit bids, implying they would need to assign separate values to the government’s stake in the airline and the quantum of its debt that they are willing to absorb, according to sources.
Air India has a debt of Rs 37,000 crore. However, it is likely that bidders will seek a haircut on the amount. The debt which they will not repay will be parked in an asset holding company owned by the government.
Tata Sons is reportedly the only other qualified bidder for the airline.
REVENUE JUMP
SpiceJet reported revenue of Rs 5,000 crore for the year ended March 31, down from Rs 12,000 crore a year ago. The airline has been making losses. However, the cargo business has witnessed more than fivefold growth in revenue in one year. It clocked revenue of Rs 1,175 crore for the financial year ended March 31, against Rs 180 crore in the previous year.
