Shares of this small-cap company surged 7 percent in Tuesday’s trading session after announcing a settlement with EDC worth Rs. 755 crores. The shares have delivered a multibagger return of 100 percent to its shareholders in one year.
With a market capitalization of Rs. 4,241 crores, the shares of SpiceJet Ltd started Tuesday’s trading session on a flatter note at Rs. 58.58 compared to its previous close of Rs. 58.75. During the trading session, the shares hit a high of Rs. 63, gaining around 7 percent and closed the day at Rs. 61 apiece.
Such a bullish movement in the share price was observed after the company in an exchange filing announced that they had signed a settlement agreement with Export Development Canada (EDC) to settle liabilities worth Rs 755 crores. The terms of which will allow the airline to clear major liabilities, leading to a comprehensive revitalization of its balance sheet.
The agreement is being termed by the airline as the ‘biggest breakthrough in SpiceJet’s financial restructuring efforts”. Under the agreement’s terms, SpiceJet will acquire full ownership of 13 EDC-financed Q400 aircraft. This agreement heralds immense long-term savings for SpiceJet, liberating the airline from the obligation of regular monthly rentals for these aircraft.
Furthermore, as part of the settlement, SpiceJet will pay a comprehensive settlement amount to resolve outstanding liabilities amounting to close to 91 million dollars as per SpiceJet’s books of accounts. Moreover, the settlement will also generate savings to the tune of Rs 567 crores for the airline.
In addition, the company stated that the liabilities stem from a loan acquired by the airline in 2011 for the procurement of 15 aircraft. With twelve of these Q400s currently grounded, their refurbishment and subsequent return to service will enable SpiceJet to promptly launch flights on numerous regional and UDAN routes.
Earlier, the airline has also made settlements with several lessors in the last few months, including the deal with Aercap, as the carrier tries to return to full capacity.
Coming onto the company’s financial statements, the revenue decreased by 29 percent from Rs. 2,004 crores during the September quarter to Rs. 1,429 crores in the December quarter. On the other hand, the net profits showcased a transition from a net profit of Rs. 198 crores to a net loss of Rs. 449 crores during the same period.
The airline company has also planned a fund infusion of Rs. 2,250 crores, this investment is aimed at expanding the airline’s network, positioning SpiceJet as a stronger player in the Indian aviation market. Additionally, SpiceJet is finalizing lease agreements for 10 aircraft to support its expansion efforts.
Headquartered in New Delhi, SpiceJet Ltd was incorporated in 1984. The company principally engaged in the business of providing air transport services for the carriage of passengers and cargo.
Written By Vaibhav Patil
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