The Hindu Business Line : SpiceJet shares down on Chairman’s resignation

Mumbai, July 14 Shares of low-cost airline SpiceJet tumbled 13.73 per cent on Monday after its Executive Chairman, Mr Siddhanta Sharma, resigned over the weekend.

The small-cap stock closed at Rs 27.95, which is Rs 4.45 lower than Friday’s close. A total of 28.38 lakh shares of SpiceJet were traded on the BSE.

Analysts said that the concerns regarding the airline’s future have increased with the resignation of its Executive Chairman.

On Saturday, the company announced that it had accepted the resignation of Mr Sharma. He cited personal reasons for his resignation and that he will be with the airline till the end of this month.

Stake sale

The company plans to raise $100 million through private equity investment. There have been reports of a possible stake sale to billionaire Mr Wilburn Ross; also there were speculations of Mr Vijay Mallya, who owns of Kingfisher Airlines, eyeing stake in the company.

“With the resignation of Mr Sharma, there could be more changes in management for the company. The sentiment around the stock will remain negative until a clear plan in chalked out for its capital infusion,” said an analyst with local stock broking firm.

Marketmen also say that now with the exit of Mr Sharma; Mr Bhupendra Kansagra (the promoter of SpiceJet and the man who appointed Mr Sharma) might also depart from the company.

“There are so many uncertainties looming around the company, that the resignation of Mr Sharma just adds to the existing negativity around the stock,” said an analyst with a brokerage.

The low-cost airline, at the beginning of the month reported a Rs 133.5-crore loss for the year ended March 2008 due to an increase in aviation turbine fuel.

“The airline was able to absorb the five per cent increase in fuel prices that was announced in November last year, but was not in a position to either absorb or pass on the full impact of the increase in fuel prices that happened in the following months. The impact was that in the fourth quarter SpiceJet reported a loss of Rs 123 crore while it was around Rs 10 crore in the third quarter,” Mr Sharma said.

On the Friday alone the stock surged 6.25 per cent, outperforming the Sensex, which dropped 3.2 per cent.

Last week, the stock went up 6.4 per cent, while the benchmark index went down 0.4 per cent.

Marketmen said that last week the share price moved up due to reports regarding possible stake sale.

The other listed aviation stocks, Jet Airways and Deccan Aviation were also down. Jet Airways was down 1.55 per cent and Deccan Aviation was down 2.39 per cent.