Eight months after proposing to hive off the cargo business into a separate entity, SpiceJet is yet to get a No Objection Certificate (NOC) from its bankers.

In December last year, during its Annual General Meeting, the low-cost carrier had proposed to its shareholders a special resolution to ‘transfer the cargo business as a wholly-owned subsidiary. It had said it “plans to add more cargo aircraft to scale up SpiceXpress’ existing capacity and transform it into a full-scale freighter cargo service”. The shareholders had voted in favour of the resolution.

Two bankers told BusinessLine that in the backdrop of the airline’s financial condition and the erosion of its net worth, they find themselves in a tough spot to grant an NOC. Indian Bank, one of the lenders to SpiceJet, has specifically asked the low-cost carrier to come back with a revival plan.

“The cargo business has generated a lot of revenue for the company in the past one-and-half-year. Its revenues, even for this quarter, is almost equivalent to its passenger segment. However, we are concerned that neither does the company have a concrete revival plan, nor does it have definitive investors to even support the business,” a banker said, requesting anonymity.

Shareholders’ nod

Responding to BusinessLine’ s queries in this regard, a SpiceJet spokesperson said that it is incorrect to state that bankers of SpiceJet have not provided the NOC. “Post-approval of the shareholders the status of our subsidiary has changed and also the manner in which we were contemplating the structuring of our cargo and logistics arm. Once the board has finally decided to structure the business in a particular manner, fresh shareholders’ approval has been sought. The company has now requested respective banks to provide the NOC which shall be issued in due course.”

When asked about the concerns raised by Indian Bank, the spokesperson said, “These are normal business practices and procedures where the banker regularly reviews the business. It is not a pre-condition for Indian Bank for issuance of NOC as suggested. On the contrary, the bankers are quite excited and appreciative of the efforts made by the company in the cargo and logistics business.”

In talks with potential investors

In February, this newspaper had reported that SpiceJet cannot hive off any business or sell any assets without permission from its lenders. It is now eight months since the airline had proposed to hive off the cargo business with the objective of bringing in a strategic investor. “We are having active discussions with many potential investors and the exercise is underway. We cannot divulge further on the same as it is price sensitive and confidential,” the airline’s spokesperson said.

In Q1 of FY22, SpiceJet reported a net loss of over ₹729 crore. In the quarter ended June 30, the company earned revenue of ₹475 crore from the passenger business and ₹473 crore from cargo business.

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