NEW DELHI: Loss-making carrier SpiceJet is hiving off its profitable cargo and logistic business and transferring it on a slump sale basis to its subsidiary SpiceXpress and Logistics (“SpiceXpress”), subject to the approval of shareholders and also such other approvals as may be required.The airline has also sought shareholders’ nod to raise up to Rs 2,500 crore via issuance of eligible securities through Qualified Institutions Placement (QIP).
“The logistics business has been valued at Rs 2,555.77 crore based on an independent valuation exercise carried out by the company and the purchase consideration for the same shall be discharged by SpiceXpress by issuance of shares of SpiceXpress to SpiceJet, subject to all approvals as may be required. It is expected that SpiceXpress will operate as a separate entity upon transfer of business on or around October 1, 2021,” SpiceJet said in a statement.
This was a much expected move by the Gurugram-based carrier as Chairman and Managing Director Ajay Singh recently said that company was making efforts to strengthen the logistics business after the Q1FY22 results were released. The carrier has already approached the government for obtaining a no-objection certificate.
According to the company’s quarterly result that was announced recently, SpiceXpress made a net profit of Rs 30 crore, with revenue for the segment growing by 285% year-on-year to Rs 473 crore for Q1FY22. In contrast, SpiceJet had reported a consolidated net loss of Rs 731.12 crore in the April-June quarter against a loss of Rs 600.52 crore in the same quarter last year.
This was the sixth straight quarterly loss for SpiceJet. The auditors of SpiceJet again raised concern about the airline’s ability to continue as a going concern as mounting losses have led to complete erosion of net worth, with liabilities exceeding assets by Rs 6,044.91 crore as of June 30, 2021.
Market experts too welcomed this move but remained cautious on the airline stock in the backdrop of a possible third Covid-19 wave, rising fuel prices, suspension of international flights and other obstacles.
“...We think that SpiceJet’s strategy of having a strong presence in the international cargo market out of India is sensible,” said HSBC in a report.