US private equity investor Wilbur Ross and Goldman Sachs will invest $100 million (around Rs 420 crore) in India’s second-biggest budget carrier SpiceJet under a definitive agreement signed today.
The money will be invested in two phases, dependent on shareholder approval and certain unspecified conditions. Under the earlier agreement, signed on July 15, Ross was supposed to invest $80 million (Rs 336 crore).
Fresh equity warrants are being issued to Goldman Sachs under the preferential issue guidelines of the Securities and Exchange Board of India (Sebi).
“This financing is intended to give SpiceJet the staying power to get through the industry consolidation that is underway,” Ross said in a statement.
Sources familiar with the developments said the renegotiated deal might also trigger an open offer, which the original deal wanted to avoid.
This is because Ross will also be buying the entire foreign currency convertible bonds from Goldman Sachs amounting to $42.5 million as well as bonds from Dubai-based investment group Istithmar valued at $25 million of the $37.5 million it holds in SpiceJet.
Based on current company information posted on the stock exchange, SpiceJet has $80 million of outstanding bonds at Rs 57 per share. If Ross buys Goldman and Istithmar bonds, it will have a 21 per cent stake in the airline, triggering an open offer. Current regulatory guidelines state any investment exceeding 15 per cent in a listed firm triggers an open offer.
Asked about the open offer, Kishore Gupta, director, SpiceJet, said: “It is for Ross to decide.” But as a company, SpiceJet is preparing for this, he added.
Gupta added: “The purchase of bonds by Ross will result in cash flows into the company as the condition that the bonds have to be collateralised has been done away with. So the bond amount can be converted into cash flows directly into the company.”
SpiceJet will call an extraordinary general meeting on September 10, at which the issue of warrants will also be discussed.
SpiceJet has a market share of over 10 per cent with 94 daily flights to different destinations.
SpiceJet shares rose 5.6 per cent to Rs 30.25 on the Bombay Stock Exchange, trading the highest since July 11.
“We are delighted that such a large amount of funding has been made available to SpiceJet at a challenging time for the aviation industry in India,” airline board members Bhulo Kansagra and Ajay Singh said in the statement.
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