Istithmar divests bulk of 13.4-per cent stake in SpiceJet

In what is seen as a direct result of the Dubai financial crisis, the investment arm of the crisis-ridden emirate, Istithmar, divested almost all of its 13.4-per cent stake in budget carrier SpiceJet on Friday for about Rs170 crore in two block deals. Around 66 per cent of the off loaded stake has reportedly been picked up by domestic mutual funds and the balance has been acquired by an FII.

Airline officials said Istithmar sold about 3.1 crore shares of its 3.2 crore holding and still retains foreign currency convertible bonds (FCCBs) worth $12 million. The deal was reportedly arranged by Bank of America-Merill Lynch.

The SpiceJet management has reasons to be happy with the deal. The low cost carrier (LCC) currently operates 19 aircraft and plans to raise the number to 25 by year-end. Also it would complete five years in May this year and is looking to start flying to neighbouring countries.

"We are looking at raising funds. The airline is doing well, reporting a significant profit last quarter. The Istithmar share sale shows investors have faith in our business model and we will have no problem in raising funds," SpiceJet director Ajay Singh said.
The reason for the sale is said to be the liquidity crunch in the Emirate.

According agency reports Sanjay Agarwal, CEO of SpiceJet, says the company still has a holding of about $12 million worth of foreign currency convertible bonds (FCCBs) in the airline.

In December Istithmar had announced plans to raise its stake over four-fold to $50 million from $12.5 million through FCCBs.