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Ramesh Sharma

Mr Kishore Gupta (right), Director, SpiceJet, presents to the Air Chief Marshal F.H. Major the first ticket of ‘Freedom to fly’ scheme. Under this special scheme each serving armed forces personnel enjoys a 100% discount on the basic fare. —

Our Bureau

New Delhi, Aug. 12 Goldman Sachs is to invest $20 million (Rs 76 crore) in the low cost airline SpiceJet by subscribing to equity warrants of the company under Securities and Exchange Board of India (SEBI) preferential issue guidelines.

These funds are to be in addition to the $80 million (Rs 345 crore) that the US-based private equity firm W.L. Ross will be investing in the airline. The investment is to be made by the private equity firm through the purchase of Foreign Currency Convertible Bond (FCCB) from Goldman Sachs and Istithmar, the equity arm of Dubai Government.

On July 14, this year, the airline board accepted an offer made by W.L. Ross to pump in funds into the company. “There has been no major change between the previous agreement and definitive agreement signed on Monday last. On 14 July we had signed a term sheet, where the final details needed to be worked out because at that point of time it was only in principle agreed that $80 million will be invested into the company. Now the only difference is that now in place of $ 80 million we will get $100 million. W.L. Ross will have $80 million and there will be issuance of $20 million of warrants,” Mr Kishore Gupta, Director, SpiceJet, told newspersons on the sidelines of the launch of a new travel initiative for defence personnel.

The monies, which are expected in two tranches with an initial flow of about $35 million, should start coming in about a week, he added. “The funds will help us survive for the next couple of years. The funds will be used for working capital for our day to day operational, used to meet our fuel bills and airport charges. But not for pre-delivery payments for aircraft,” Mr Gupta said.

The budget carrier was not in talks with any other company for picking up funds, the SpiceJet Director added.

SpiceJet, like several other airlines, has been hit by the rising cost of aviation turbine fuel, which accounts for between 40-45 per cent of the operating cost of most airlines. The airline reported a net loss of Rs 133.5 crore for the full year ending March 2008 as against a loss of Rs 72.1 crore reported during the previous year, mainly due to the increase in fuel prices.

SpiceJet, which started operations in 2005, currently has a fleet of 15 Boeing 737 aircraft and operates 94 daily flights.

More Stories on : Airlines | Preferential Allotments | Foreign Institutional Investors

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