SpiceJet stock soars on buyout buzz

Carrier in denial, even as Paramount looks for a buy.

Shares of SpiceJet, India's second-largest low-fare carrier, gained 3.8 per cent today following market speculation on Paramount Airways joining the race to buy a stake in the company.

The SpiceJet scrip closed at Rs 59.65, against the previous day's close of Rs 57.45. The scrip was trading at around Rs 46.75 a month ago.

Other airlines, including Jet Airways and Kingfisher Airlines, are also looking at a possible acquisition of a controlling stake in SpiceJet. However, a SpiceJet statement denied that the airline is up for sale.

While Kingfisher chief Vijay Mallya said last week he was interested in SpiceJet, M Thiagarajan, managing director of Paramount, was quoted by agencies today as saying that the company is "talking to airlines in India. We are interested in acquisitions. But specifically I cannot comment on any one."

Paramount is looking to acquire an airline to gain access to landing slots and parking bays, Thiagarajan said. "That will facilitate our expansion much faster than otherwise," he said. "We are prepared to acquire another airline. We are in dialogue."

Airlines are eyeing the promoter holding of Royal Holding Services, which owns 12.91 per cent in SpiceJet, as also Istithmar's (FII investor) 13.42 per cent.

However, the SpiceJet statement issued after market hours said the airline is one of the best funded in the country with a large cash reserve to fund its expansion. There is no requirement to raise any funding at this juncture, it said.

In January this year, SpiceJet raised $67 million through a preferential allotment and these shares are subject to a lock-in period of 12 months from the date of allotment, January 11, 2007.

"Our largest stakeholders, the Kansagras, Ajay Singh and Istithmar Holdings, are long-term investors and have strongly dismissed speculation of any stake sale," said the SpiceJet statement.

SpiceJet is spending as much as $400 million to buy 10 new Boeing aircraft. The airline, which started flights in May 2005, aims to carry 6 million passengers in the current financial year.