SpiceJet shares snap two-day fall, jump 5% today; here's why

Shares of budget carrier SpiceJet Ltd rose sharply in Tuesday's trade, pausing their two-day fall. The stock surged 4.91 per cent to hit a day high of Rs 31 over its previous close of Rs 29.55. Around 18.14 lakh shares changed hands today BSE, which was lower than the two-week average volume of 20.96 lakh shares. Turnover on the counter stood at Rs 5.51 crore, commanding a market capitalisation (m-cap) of Rs 1,832.62 crore.

Today's sharp rise in the share price came after it was reported that aviation regultor DGCA has taken off SpiceJet from its enhanced surveillance regime. The airline, which has been facing multiple headwinds, was placed under enhanced surveillance recently.

On technical setup, the stock was last seen trading higher than the 5-day, 20- and 50-day moving averages but lower than the 100-day and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 56.82. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a negative price-to-earnings (P/E) ratio of 0.90 against a negative price-to-book (P/B) value of 0.30.

The scrip has an average target price of Rs 44, Trendlyne data showed, suggesting a potential upside of 45 per cent. It has a one-year beta of 0.84, indicating low volatility on the counter.

A senior Directorate General of Civil Aviation (DGCA) official today said, "In view of the observations made in the past concerning inadequate maintenance and incidents during the monsoon season last year, SpiceJet was placed under enhanced surveillance. Accordingly, 51 spot checks were conducted across 11 locations pan India, on the Boeing 737 and Bombardier DHC Q-400 fleet of aircraft, where in a total 23 aircraft were inspected and 95 observations were made by the DGCA teams."

The findings were of routine nature and were not considered significant by the DGCA. "Suitable maintenance action was taken by the airline to address the findings in accordance with DGCA guidelines. As a consequence, SpiceJet has been taken off the enhanced surveillance regime by DGCA," the official stated.

Earlier this month, SpiceJet's top shareholder Ajay Singh said he would infuse Rs 500 crore into the troubled airline as it looks to return to full operations.

With this fund infusion by the promoter, SpiceJet said it would be entitled to additional credit facilities of Rs 206 crore under the Emergency Credit Line Guarantee Scheme.

In a separate development, the Supreme Court directed SpiceJet to pay the entire arbitral amount of Rs 380 crore to its former promoter Kalanithi Maran. "The payment of Rs 380 crore as directed to be paid by the Supreme Court in the matter relating to Kalanithi Maran and his firm KAL Airways is only a security deposit amount arising from execution proceedings," the airline stated.

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