SpiceJet QIP: Airline Approves Floor Price At Rs 64.79/Share For Rs 3,000 Crore QIP, Shares Slump; BUY?

The shares of SpiceJet experienced a sharp decline of nearly 6% on September 17, as investors seized the opportunity to book profits following a recent rally. The drop comes just a day after the stock surged in anticipation of the airline's Qualified Institutional Placement (QIP) announcement, aimed at raising up to Rs 3,000 crore at a floor price of Rs 64.79 per share.

The QIP, which opened on September 16, marks a significant move for SpiceJet. Although the exact size of the QIP has not been officially disclosed, the airline has previously stated board approval to raise up to Rs 3,000 crore. The entire amount raised will be directed towards improving the airline's operations, including reducing debt and expanding its fleet.

SpiceJet's decision to open the QIP is part of a broader strategy to stabilize and expand its operations. The funds are intended to help the airline get more aircraft into service and mitigate its debt liabilities. This capital infusion is also expected to provide a much-needed boost to the airline's financial stability.

The airline's financial performance has faced challenges recently. For the June quarter, SpiceJet reported a 20% year-on-year decline in consolidated net profit, which fell to Rs 158 crore. Additionally, total income for Q1FY25 decreased by 8.3% year-on-year, totalling Rs 2,077.7 crore. On a sequential basis, however, net profit after tax saw a 24% increase from Rs 127 crore in the previous March quarter, indicating some recovery.

SpiceJet's stock had previously surged by 8% on September 16 and had risen more than 21% over the past five days in anticipation of the QIP and the airline's efforts to stabilize its finances. Year-to-date, the stock has appreciated by 28%. This recent uptick was partly driven by optimism around the QIP and the airline's recent financial measures.

In addition to the QIP, SpiceJet has been active in addressing its financial issues. On September 10, the airline finalized a debt restructuring deal with Carlyle Aviation. As part of the agreement, Carlyle agreed to write off lease arrears and invested $20 million in SpiceXpress, converting lease arrears into compulsorily convertible debentures. Carlyle also converted $30 million of debt owed by SpiceJet into equity at Rs 100 per share.

On September 12, SpiceJet moved the Supreme Court to challenge a Delhi High Court order that had grounded three of its aircraft engines due to defaulting on payments to lessors.

Despite the recent decline, SpiceJet's shares have shown growth over the past year, delivering a multibagger return of over 101%. As of 10:35 am on September 17, the shares were trading at Rs 73.60 on the Bombay Stock Exchange (NSE), reflecting a decline of more than 5%.