Co-founder Singh, who in the immediate past made his intent clear on taking over the beleaguered low-cost carrier, agreed on Thursday to buy a majority stake from its billionaire-owner Kalanithi Maran, who ran the airline into the ground with a series of flash sales at bargain basement prices in an attempt to woo customers-the strategy backfired badly as losses mounted.
After a SpiceJet Board meeting on Thursday, the company in a statement released to the Bombay Stock Exchange (BSE) said that Maran would transfer his entire stake to Singh as part of the revival plan.The Board approved the proposal of the principal shareholder and promoter Maran and KAL Airways to transfer the ownership, management and control of the no-frills airline to Singh.
This was done under a 'Scheme of Reconstruction and Revival for the takeover of ownership, management and control of SpiceJet Limited' to be filed before the civil aviation ministry.
The Board has further directed SpiceJet to take further steps to implement and undertake necessary steps, including making an appropriate application before the ministry, for seeking approval of the 'Scheme'.
Singh, who is partnering with a unit of JPMorgan Chase and Co, showed interest after SpiceJet employees appealed to him to bail them out.Singh, who founded the airline in 2005, stepped in when SpiceJet was forced to ground its fleet briefly last month after running out of cash to pay creditors and Maran's Sun Group saying it would not put up any more money.
After stake sale, the current promoters will continue to own 10 per cent in the form of warrants in SpiceJet, Sun Group chief financial officer SL Narayanan said.
The warrants, when converted, will lead to an infusion of Rs 90 crore, he added.
Singh in his personal capacity still owns 4.5 per cent stake.
"We think whatever relief is required in the larger interest of preserving the airline would be forthcoming from the government and the regulator," Narayanan said.
Chief operating officer Sanjiv Kapoor said that the latest move is a positive development while adding that some more steps need to be followed.
He also indicated that some leasing-related contracts could be renegotiated under the new ownership.
SpiceJet has around 5,000 people and operates 230 flights a day in a market where demand for air travel is rising rapidly but making a profit has proven difficult for most major airlines.
"Survival for SpiceJet requires a lot of things to materialise," said Harsh Vardhan of Starair Consulting.
"It needs a large chunk of cash flow; it needs operations streamlined. And a lot of it will depend on the competition," he added.