Beleaguered budget carrier SpiceJet Thursday announced its decision to transfer the ownership, management and control of the company to co-founder Ajay Singh from Sun Group chairman Kalanithi Maran and Kal Airways.
Maran and Kal together held 53.5 percent in SpiceJet while Singh had 4.5 percent stake.
The restructuring scheme has been submitted to aviation ministry and we will wait for its nod to make further announcements, said SL Narayanan CFO, Sun Group. He agrees that certain job losses are inevitable when the carrier loses some fleets.
Narayanan expects government to act very quickly on the approval. The bank loan of the airline is less than Rs 300 crore, he added.
"We will become minority shareholders post ownership transfer… Induction of new investors will be dealt with by Ajay Singh," Narayanan said.
Meanwhile, in an interview to CNBC-TV18, SpiceJet COO Sanjiv Kapoor said the deal is a positive development for the company, which secures the future. He said the company looks forward to resuming normal full operation soon.
"We apologise for all the difficulties during this difficult period. There is still a process to be followed. It will take a few days to complete. We are happy that this positive development has taken place," Kapoor told CNBC-TV18.
When asked whether existing promoters would exit completely, he said the management is not privy to every detail and that it would be best to talk to promoters on the matter.
"We hope to be able to renegotiate some of our contracts, big contracts related to engineering etc. We hope to be able to now be in a position to renegotiate some of those," he said.
Below is the transcript of SL Narayanan's interview with Nayantara Rai, Shereen Bhan and Sonia Shenoy on CNBC-TV18.
Nayantara: Your press release has no financial details, the current stock price trading at around Rs 18, can you take us through the financial contours of this deal?
A: Unfortunately I can't say much about the specifics of this deal till such time the scheme that has been submitted to the ministry of civil aviation gets approved. We debated if we should even make an announcement to the stock exchange but then the legal advice was that it is better to disclose this and then wait for the approval from the ministry at which time we will make further announcements.
Nayantara: Between the Maran's and KAL there has been talk of about stake of 53.5 percent. Can you just tell us are you going to seek an exemption from an open offer?
A: It is not for me to make this exemption because the acquirer is Ajay Singh and I am sure whatever is required or otherwise will be dealt with by Ajay Singh who has to take this call and whatever is required to be done will get done in strict compliance of the regulations.
Sonia: Can you just give us a timeline on when will you submit this scheme to the aviation ministry and when do you expect the approval to come through?
A: The scheme has already been submitted today and I think the ministry should be acting on it pretty quickly because everybody knows that there are accrued liabilities and there have been various pressure points acting on the airlines in terms of liquidity. So, I think the government will act pretty quickly on it.
Sonia: Along with financial restructuring, will there be any corporate restructuring that will take place now in terms of jobs etc?
A: That again is not for me to say because the new leadership under Ajay Singh will do whatever is necessary which is in the larger interests of all stakeholders. However, very simply this business operates on well tested ratios of number of employees per aircraft. So, when you reduce the fleet, automatically there will be certain job losses, that is inevitable but then that has to be endured so that the corporation survives and there are no greater job losses.
Shereen: What is the exit price for you and also is Ajay Singh coming along with a consortium of private equity players? There has been a lot of talk about JP Morgan being part of the consortium. Can you confirm to us along with Ajay Singh, who else is putting the money into SpiceJet?
A: As I mentioned, most of these details are contained in the scheme. It will not be proper for me to comment on specifics of the deal till such time it is approved by the government because there is a substantial change in control because the entire shareholding is being transferred.
Shereen: Do not confirm the name but can you confirm for us whether it is a single private equity player or is it a consortium of private equity players that will come on board along with Ajay Singh, the former promoter?
A: I was just coming to that because now with the passing of the baton to Ajay Singh, what is going to be done in terms of induction of new investors, what price, what quantum is best dealt with by Ajay Singh as I am no longer the man who will be in the know of these matters.
Shereen: But what about the exit price, what is the hesitation in explaining to us what the exit price is?
A: This again by way of abundant caution I am refraining from making any comment on specifics of this deal because it is almost like a quasi sub-judice kind of a situation because this is all captured in the scheme which has been submitted to the ministry of Civil Aviation. It is not going to take much time, probably as early as tomorrow I will be back on your channel explaining why we did what we did.
Shereen: Since you are talking about the need for regulatory relaxation let me ask you again that question as far as the open offer is concerned because the acquirer will need to make the open offer which in this case is Ajay Singh but the conversation about seeking an exemption as far as the open offer is concerned would have been had between you as well as Ajay Singh and that would have in a sense also determined his willingness to get on board as well as the exit price?
A: It is not for me, what would I do even assuming that he discusses with us. He didn't discuss with us, it is actually the agency that would decide on this, the securities exchange board of India. So, I don't think I am competent to even express an opinion on the maintainability of that request.
Shereen: I am not talking about the maintainability of the request, the maintainability of the request is going to be assessed by the market regulator but there would have been a conversation with the incoming promoter and yourself on the possibility of that and that would have determined the contours of this transaction.
A: Even assuming that there was a conversation is irrelevant. Even assuming that I said yes or no; I am nobody.
Shereen: We know that your deal or the plan is in fact being submitted to the aviation ministry. I understand that the CEO Sanjiv Kapoor is currently at the aviation ministry submitting that plan. What happens in terms of the liabilities that are currently on your books?
A: There will be some funds which will come in and as I mentioned although I do not know the specifics Ajay Singh and his investors will also pump in some more money. Whatever is required to meet all the financial obligations and get the airline into a fine settle will be done by the new leadership.
Shereen: There has been all kinds of rumors about USD 100 million perhaps in the immediate term and USD 250 million as to kick start this airline to get it running back to its normal operations or some sort of normal operations. Can you take us through the fund infusion at this point that has been articulated in that revival plan?
A: There has been a lot of misunderstanding on the size of our liability because people have been looking at the balance sheet and adding even long-term debt, the financial leases that we have executed with the export development corporation of Canada. So those are basically long-term debt and matched by adequate collateral on the asset side which is the 15 bombardier plane.
Our bank loan is less than Rs 300 crore. It is unfortunate that we ran out of liquidity because of a variety of reasons and the banking system refused to lend us any kind of money which is when we went to the government for help. The actual number that is required to get this up on a fleet in running is very small; it is not anywhere the kind of numbers that have been bandied.
Once the company starts operating normally like we had another deadly impact which was the result of the Directorate General of Civil Aviation (DGCA) limiting sales to 30 days which then subsequently got relaxed in March 31 st and I hope further relaxations will be forth coming and that part of almost like a bank run everybody wants to refund and everybody saying I want it now so if everybody lands up at your doorstep and say pay me now or I am just going to pull rug off your feet the best of companies can fail and that is really what happened to SpiceJet.
