NEW DELHI: At a time when the rating agencies and investors are skeptical about the survival of many airlines, HDFC Trustee Company Limited, a subsidiary of HDFC Mutual Fund, has bought 3.4 crore shares of domestic carrier SpiceJet from the open market, which accounts for 5.45 per cent stake in the private airline.
The open market stake purchase comes days after rating agency CRISIL downgraded the rating for SpiceJet’s short-term loans from ‘BB-’ to ‘B’ on significant deterioration of business risk profile amidst the coronavirus lockdown.
“India’s biggest mutual fund buying a significant stake (in SpiceJet) shows that it has confidence in the airline coming out of the present crisis,” said an industry executive.Shares of the Ajit Singh-promoted carrier have nosedived in the last one year. From trading at a 52-week high of Rs 156.90 a share, it fell 5 per cent intraday on Monday to close at Rs 35.15 on the BSE.
Industry observers believe that GoAir and SpiceJet have been hit the worst due to the ban on international and domestic flights, as they don’t have the requisite cash flow.
For SpiceJet, and the aviation industry in general, a lot is dependent on the soon-to-be-announced relief package from the government intended at supporting the sectors financially hit by coronavirus. Recent reports have claimed that aviation sector may incur losses of over $3 billion by Q1FY21 due to the suspension of flights.
According to Centre for Asia Pacific Aviation, IndiGo and SpiceJet, the two listed carriers, alone could report combined losses of $1.25-1.5 billion across FY20 and Q1 of FY21. It added that the pandemic impact will be so severe that smaller carriers may go bankrupt.
SpiceJet is said to be taking multiple steps to conserve its cash flow. Recently, it said its fleet of five dedicated freighters are crisscrossing the country daily and flying to nearby countries including to those in the Middle East, South East Asia, among other places with cold chain medical supplies, medicines, medical devices and more to fight Covid-19.