SpiceJet gets nod to hive off SpiceXpress, says CMD Ajay Singh

SpiceJet chairman and managing director Ajay Singh has said that the low-cost carrier has got approval from banks and shareholders to hive off its cargo and logistics arm, SpiceXpress. The division will be completed by the first week of August.

In August 2021, SpiceJet had announced the transfer of its cargo and logistics services on a slump-sale basis, along with all the related assets and liabilities, including know-how, trademark, licenses, franchises, customer contracts and distribution network, to its subsidiary SpiceXpress, subject to all the requisite approvals. The move was aimed at enabling SpiceXpress to grow rapidly and raise capital independent of SpiceJet.

On July 5, the Directorate General of Civil Aviation (DGCA) issued a show-cause notice to SpiceJet over technical snags, flagging safety oversight, inadequate maintenance and payment-related shortage of spares.

There have been at least eight technical malfunction incidents involving the airline’s aircraft over the past three weeks, including three on July 5 alone.

“We have got the shareholders’ approval for that (hiving off SpiceXpress from SpiceJet). We have got approval from our banks to do that. I think in the last phase… we should be done by the first week of next month,” a PTI report quoted Singh as saying. “It will be a separate company called SpiceXpress. It will be owned by SpiceJet but it will be a separate company,” he added.

SpiceJet has been making losses for the last three years. From Rs 316 crore in 2018-19, its net loss increased to Rs 934 crore in 2019-20 and to Rs 998 crore in 2020-21. For the nine months ended December 2021, the net loss was Rs 1,267 crore.

However, SpiceXpress has been witnessing a growth in its revenues. On a sequential basis, the revenues increased from Rs 498 crore in Q2 FY22 to Rs 584 crore in Q3 FY22, registering a jump of 17%.

SpiceXpress has a network that spans over 68 domestic and over 110 international cities, including those in the US, Europe and Africa.

SpiceJet had said in August 2021 that the logistics business was valued at `2,555 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”.

Singh had said that the proposed transfer of the business to SpiceXpress will allow the new company to rapidly grow its innovative logistics platform.

“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 had added.