Banks and shareholders have given their approval to hive off cargo and logistics company Spicexpress from Spicejet airline and the bifurcation will be done by the first week of August, the carrier’s CMD Ajay Singh has said.
Spicejet had on August 17 last year announced it was transferring its cargo and logistics services on a slump sale basis to its subsidiary Spicexpress as it will allow the company to raise funds independent of the budget carrier and rapidly grow.
Spicejet is under the regulatory scanner right now. Just five days back, the airline was issued a show-cause notice by the Directorate General of Civil Aviation (DGCA) after its aircraft were hit by at least eight incidents of technical malfunction since June 19.
The DGCA while stating that the budget carrier has “failed” to establish safe, efficient and reliable air services gave it three weeks’ time to respond to the notice.
The airline has been making losses for the last four years. It incurred net losses of Rs 316 crore, Rs 934 crore and Rs 998 crore in 2018-19, 2019-20 and 2020-21, respectively. In April-December period of 2021, the airline posted a net loss of Rs 1,248 crore.
However, the revenue from Spicexpress has been increasing. In October to December period of 2021, Spicexpress saw its revenue jump 17 per cent on a quarter-on-quarter basis to Rs 584 crore.
While talking to PTI last week, Singh said: “We have got the shareholders’ approval for that (hiving off Spicexpress from SpiceJet). We have got the approval from our banks to do that. I think in the last phase…we should be done by the first week of next month.”
“It will be a separate company called Spicexpress. It will be owned by SpiceJet but it will be a separate company,” he added.
While announcing the plan to hive off Spicexpress on August 17 last year, the airline had said the logistics business has been valued at Rs 2,555.77 crore based on an independent valuation exercise carried out by the company and “the purchase consideration for the same shall be discharged by Spicexpress by issuance of shares of Spicexpress to Spicejet, subject to all approvals as may be required”.
Spicexpress has a network which spans over 68 domestic and over 110 international cities, including those in the US, Europe and Africa.
Singh had on August 17, 2021 said the proposed transfer of business to Spicexpress will allow the new company to rapidly grow its innovative logistics platform and its unique fulfilment as a service business model.
“Spicexpress will also be able to raise capital independent of SpiceJet to fund this growth. We are confident that the performance of Spicexpress as an independent entity will leverage and unlock significant value for SpiceJet and all its shareholders,” he added.