Airline Stock Under Rs 50 Jumps on Rating Update From Acuité Ratings & Research; Details Inside

The stock’s 52-week high is Rs 79.90 per share and its 52-week low is Rs 39.91 per share.

On Wednesday, shares of SPICEJET LTD jumped 2.65 per cent to Rs 49.50 per share from its previous closing of Rs 48.22 per share. The stock’s 52-week high is Rs 79.90 per share and its 52-week low is Rs 39.91 per share.

SpiceJet’s Financial Outlook Amidst Challenges
SpiceJet continues to navigate a turbulent financial landscape, with Acuité Ratings & Research reaffirming its long-term rating at ACUITE B+ (Stable) and short-term rating at ACUITE A4. The airline faces legal challenges, including insolvency petitions filed by three Irish lessors and a former pilot, amounting to claims of approximately Rs 110 crore. Despite these hurdles, the company has managed significant fund infusions over the last 15 months, with additional promoter contributions and share warrants expected in the coming months. These funds, which include Rs 619 crore in unutilized fixed deposits, are aimed at fleet expansion, lessor settlements, and operational improvements, signalling a potential turnaround.

SpiceJet’s Struggles with Market Share and Costs
The airline has seen a continuous decline in market share, dropping from 5.6 per cent in January 2024 to 3.47 per cent in December 2024, highlighting its struggle against increasing competition. Financially, while the company’s net loss has narrowed from Rs 1,512.95 crore in FY23 to Rs 423.72 crore in FY24, its total debt situation remains precarious. Additionally, operating costs remain a significant concern, with aviation turbine fuel (ATF) comprising 35-40 per cent of its revenue. Given the volatility of crude oil prices and foreign exchange fluctuations, the company’s ability to sustain profitability is highly uncertain. However, a planned shift towards fuel-efficient Boeing Max aircraft could help mitigate some of these risks soon.

Funding and Future Prospects
To bolster its liquidity, SpiceJet raised Rs 3,000 crore through a Qualified Institutional Placement (QIP) in September 2024, attracting marquee investors such as Goldman Sachs, Morgan Stanley, BNP Paribas, and Tata Mutual Fund. The company is expected to receive an additional Rs 676 crore from promoter contributions and share warrants, which could further strengthen its financial position. While these efforts indicate a commitment to revitalization, the airline's financial risk profile remains weak, with a negative net worth of Rs 5,233.05 crore as of FY24. Acuité believes that the timely utilization of funds, resolution of legal disputes, and strategic fleet expansion will be critical factors determining SpiceJet’s future trajectory.

SpiceJet is India's favourite airline that has made flying affordable for more Indians than ever before. SpiceJet is an IATA-IOSA certified airline that operates a fleet of Boeing 737s & Q-400s and is one of the country's largest regional players, operating multiple daily flights under UDAN or the Regional Connectivity Scheme. The majority of the airline's fleet offers SpiceMax, the most spacious economy-class seating in India. Investors should keep an eye on this Small-Cap stock.

In Q3FY25, the company demonstrated a remarkable turnaround, achieving a net profit of Rs 26 crore compared to a net loss of Rs 300 crore in the same period last year. This positive shift is attributed to strong financial performance, including total revenue of Rs 1,651 crore, an EBITDA of Rs 210 crore, and a positive net worth of Rs 70 crore. The company also achieved an impressive Passenger Load Factor of 87 per cent and a Total passenger RASK of Rs 4.57. Additionally, the company spent Rs 170 crore on ungrounding aircraft, which likely contributed to the improved operational efficiency.

For the nine-month period of FY25, the company significantly reduced its losses to Rs 267 crore compared to Rs 528 crore in the same period last year. EBITDA saw an improvement, reaching Rs 401 crore (Rs 524 crore excluding the forex impact) versus Rs 385 crore (Rs 466 crore excluding forex) in the prior year. The total revenue for the period reached Rs 3,838 crore. The company also demonstrated strong operational performance with an impressive Passenger Load Factor of 88 per cent and a total passenger RASK of Rs 4.60.

Disclaimer: The article is for informational purposes only and not investment advice.