SpiceJet, one of the two companies trying to take over the national airline, has rejigged its holding structure by transferring its cargo business to a wholly owned subsidiary to allow for greater ease of monetization.
The airline also said it will also raise Rs 2,500 cr through a qualified institutional placement of SpiceJet shares.
The cargo business was valued at Rs 2,555.77 cr, said the low cost carrier, and shares worth an equivalent amount will be issued by the subsidiary SpiceXpress and Logistics Private Limited to SpiceJet. Since the shares will be issued to the parent company, SpiceJet shareholders will not get the same and will only have indirect ownership in the logistics company.
The idea, for now, seems to be to raise funds in the logistics business, given that that segment has not been hit as hard by COVID-related restrictions as the passenger segment, and many investors may want to invest in it.
“The transfer of logistics business to SpiceXpress will provide greater and differentiated focus to cargo and logistics business and will allow raising capital for the business to accelerate its growth,” the airline said.
“The proposed transfer, with separate and enhanced management focus, will provide greater opportunity and flexibility in pursuing long-term growth plans and strategies for SpiceXpress business providing various innovative logistics platform using fulfilment as a service.
“It will also assist the management in evaluating the business performance of SpiceXpress as an independent entity while leveraging and unlocking significant value for the Company and its shareholders,” it added.
The company also received shareholders’ approval to raise funds by issue of eligible securities through Qualified Institutions Placement (QIP). SpiceJet plans to raise INR 2,500 crore through a QIP.
In terms of accounting, the transfer of the logistics business will result in a one-time gain of INR 2555.77 crore for SpiceJet wiping out a substantial portion of the company’s negative net worth. SpiceJet had a negative net worth of INR 3300 crore as on June 30, 2021, it added. The negative net worth will reduce to about INR 745 crore post the transfer of the logistics business.
Ajay Singh, Chairman and Managing Director, SpiceJet, said the approval paves the way for the company’s “long term plans to take a concrete shape” and will result in unlocking significant value for the shareholders.
“Post the transfer of the logistics business, the new company will be able to raise capital independently of SpiceJet to fund its growth. We have also received shareholder approval to raise funds through a QIP ensuring our long term growth plans remain intact,” he said.
The logistics business had a net profit of INR 30 crore as of June this year, while revenue was at Rs 473 crore. It has a presence in 68 domestic and over 110 international destinations including US, Europe and Africa.
The remote e-voting on the proposal, sought through postal ballot commenced on 18th August, 2021 and ended on 16th September, 2021. The result of postal ballot was declared on 17th September, 2021.