Even as Ajay Singh plans to hive off SpiceJet’s cargo business SpiceXperess by August, it is yet to receive approvals from its lenders. SpiceJet applied for the No Objection Certificate (NOC) over six months ago. However, sources said lenders do not seem to have clarity on the hive-off. “We have not been given any clarity yet. We do not see the hive off being completed by August,” said a banking source.

According to multiple sources, SpiceJet has received conditional approval only from YES Bank; however, it has not received approval from any of its other lenders. 

“YES Bank, too, has given a list of fourteen conditions, which have to be met by SpiceJet if it wants approval. These include the details and documents of the potential investor, the amount that will be raised by the airline, the contours of the possible deal and a host of other compliances,” said a person close to the development. 

However, when BusinessLine reached out to SpiceJet, a spokesperson claimed that “approval has already been received from primary lenders”. SpiceJet’s lenders include YES Bank, Indian Bank, IDFC First, City Union Bank, Export Development Bank, Allahabad Bank and ICICI Bank. 

Indian Bank is the second-biggest lender to SpiceJet after YES Bank. According to sources, SpiceJet is yet to receive approval from its other banks.

On February last year, SpiceJet had released a list of resolutions that its shareholders had agreed to at an annual general meeting. Among other resolutions, the shareholders “authorised the board to transfer by way of sale or otherwise the cargo business of the company to its wholly-owned subsidiary, namely SpiceXpress and Logistics Private Limited”.

At that time BusinessLine had reported citing sources that the loan sanction letter had a special covenants clause, under which the permission of the lenders is mandatory before taking such decisions. 

It had claimed that the transfer of the cargo business would provide greater and differentiated focus to the segment, while it will allow the “possibility of raising capital” to accelerate its growth, the company’s Annual Report for FY21 said, adding that “it will provide greater opportunity and flexibility in pursuing long-term growth plans and strategies for SpiceXpress business”.

According to sources, SpiceJet has said it will raise up to $1 billion through the sale of the cargo business. However, sources have questioned, “Where is the investor who is willing to invest in the cargo business,” the person said, adding that “The lenders aren’t going to let go of the business just like that.”

The person had pointed out that if either passenger and freight - as the two elements of the airline business - is removed, then “the claim of the lenders moves away from that cash flow, which is a loss for the banks. You are removing one of the important cash segments of the company, and it will have a bearing on the cash flow.”

SpiceJet has been under immense scrutiny over technical snags, court cases, payment delays, and defaults.