Spicejet stake sale: Domestic focus to help company retain edge

The acquisition of a 37.75% stake in low-cost or budget airline Spice Jet by Sun TV Network’s chief Kalanithi Maran, including the holdings of strategic investor Wilbur Ross and Bhulo Kansagra, one of the promoters of the company, at Rs 47.25, augurs well for the company.
In an industry which bleeds cash, SpiceJet should be better off with an investor such as the promoter Sun TV Network, which has deep pockets and is doing well in the South.
Retail investors stand to gain a lot from this deal. By holding on for a while they may be in a position to secure a better price either in the form of the open offer of 20%, which Mr Maran has to launch or let the market factor in the development in the company’s stock price and then unload it at a better price than the current ruling price
of Rs 56.
Spice Jet’s low-cost carrier business model appears to have worked well on the efficiency scale as after close to a decade it has been able to generate a profit on a full-year basis. This is quite a feat considering the fact although all the full service carriers have been able to prune their losses, they are still in the red.
Going forward, it is only the low-cost carrier that may flourish in the local aviation business.
14/06/10 Rajesh Naidu/Economic Times

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Categories: New Jun 2010, SpiceJet Jun 2010