SpiceJet Shows Interest in Acquiring Go First Airline

SpiceJet Limited, the second-largest airline company in terms of market capitalisation, has expressed interest in acquiring the airline Go First. It intends to present an offer following a comprehensive review, aiming to establish a robust and sustainable airline, potentially through collaboration with SpiceJet.

Collaboration with a purpose

In a notification to the exchanges on Tuesday, the airline stated that it has “expressed interest with the Resolution Professional of Go First and wishes to submit an offer post diligence, with the view of creating a strong and viable airline potentially in collaboration with SpiceJet.”

The company’s Board recently approved and initiated the process of raising fresh capital of approximately USD 270 million to fortify its financial position and allocate resources toward investment in growth plans, Spice Jet added. They might use some of this new money to possibly buy Go First.

Last week, SpiceJet announced its plan to raise fresh capital of Rs 2,250 crore by issuing equity shares to financial institutions, foreign institutional investors (FIIs), high net worth individuals (HNIs), and private investors. The purpose is to strengthen the airline’s financial position and expedite its growth trajectory.

Besides SpiceJet, reports suggest that Sharjah-based aviation firm Sky One and Africa-focused Safrik Investments have also showcased interest in acquiring Go First.

The Go First saga

Go First has been grounded since May. The airline possesses a fleet of 54 Airbus SE A320neos. The no-frills carrier has filed for voluntary bankruptcy proceedings amidst financial difficulties, primarily triggered by Pratt & Whitney engine issues. Incorporated in 2005, Go First (formerly known as Go Air) is a part of the Wadia Group.

The lenders of Go First intend to seek litigation finance to recover up to Rs 12,000 crore which is entangled in various lawsuits, as the bankrupt airline faces the prospect of liquidation. This sum encompasses an arbitration award obtained against engine manufacturer Pratt & Whitney at the Singapore International Arbitration Centre (SIAC) earlier this year, along with several ongoing lawsuits.

Go First has outstanding debts amounting to over Rs 6,200 crore with creditors. Among them, the Central Bank of India and Bank of Baroda hold the highest positions as the top two creditors for the airline, with dues of Rs 1,934 crore and Rs 1,744 crore respectively.

Share Performance: 

Today, the company’s shares opened at Rs 66, marking a 2.8% increase from the previous day’s closing price of Rs 64.21 per share on the BSE. Throughout the day, the stock surged by approximately 8%, reaching an intraday high of Rs 69.20 per share, and ultimately closed at Rs 66.08 per share on the BSE. It also achieved its 52-week high of Rs 69.20 today. The current market capitalisation of the company stands at Rs 4,520 crore, and the stock has generated an impressive return of around 140% over the past six months.

Financial Performance: 

SpiceJet recently announced its Q2FY24 earnings report, revealing a 27% year-on-year decline in revenue from Rs 1,954 crore to Rs 1,429 crore. Furthermore, the company reported an operating loss of Rs 443 crore, compared to the earlier figure of Rs 555 crore. The company’s net profit narrowed from Rs 833 crore to Rs 449 crore during the quarter.

SpiceJet Limited is primarily engaged in the business of providing air transport services for the carriage of passengers and cargo.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.