Tatas buy 7.5% in SpiceJet

First investment by the group in aviation; deal size may be less than Rs 100 cr.

In its first investment in the aviation sector, the Tata group has picked up a 7.5 per cent stake in Delhi-based budget carrier SpiceJet for less than Rs 100 crore. The stake is being acquired through one of the group's financial investment arms.

A Tata group executive confirmed the development and said: "It is not a strategic investment "" purely a financial one. There will not be any board-level representation in SpiceJet." When contacted, SpiceJet executives declined to comment.

Sources close to the development said the Tatas were likely to acquire the minority stake through preferential allotment. The total price will be less than Rs 100 crore.

At the current rate, the market capitalisation of the company is Rs 985 crore. After the preferential issue, the valuation will be Rs 1,300 crore and the promoter holding of SpiceJet will come down to 15.69 per cent from 16.86 per cent. Its director Ajay Singh holds the largest stake of 5.42 per cent.

This will come down to 5.04 per cent. The paid-up equity capital of the company is Rs 184.3 crore with 18.43 crore equity shares. The London-based Kansagra family holds the second highest stake.

The SpiceJet stock closed at Rs 53.45 on the Bombay Stock Exchange on Friday, 4.9 per cent higher than the previous day's close of Rs 50.95.

Though the investment is purely a financial one, it is significant considering that the Tatas have been looking at an entry into aviation for a while.

The group had earlier floated a consortium with Singapore Airlines to bid for acquiring a 40 per cent stake in Air-India. The attempt was aborted because the government did not show any inclination.

Sources said the group had also been keen on picking up a stake in Nira Radia promoted Magic Air, which was to be launched. But that deal did not happen as the government did not allow the launch of the airline.

Sources close to the group, however, said the investment in SpiceJet could not be considered as Tata group's foray into aviation and it was purely a private equity investment.