SpiceJet shares: Should you buy/hold post Q3 results, fundraising plans?

SpiceJet’s (SJ) reported EBITDAR turned positive to ₹5.9 bn (Indigo: ₹34 bn) as demand picked up amid the festive season. Additionally, return of aircrafts and a waiver on lease rental further drove EBITDAR, highlighted brokerage Nuvama Research in a note.

“Given the lack of transparency for investors, transfer of the cargo business, replacement of cheap Boeing planes, inability to raise funds and weak balance sheet, we cut FY23E/24E EBITDAR by 6%/ 9%. Maintain ‘HOLD/SN’ with a revised target price of ₹40 (earlier ₹41) as we roll forward to FY25E,” the note stated.

“As per reports, Carlyle Aviation, its biggest lessor, agreed to convert its $100 mn o/s lease rental into a 5% equity stake – should considerably deleverage SJ’s balance sheet. We anticipate yields to moderate as pent up demand fades, however may remain healthy. The addition of the 737-8 MAX aircrafts will likely help buttress growth – higher capacity (220 seats vs. 180 in 737 NG) and better fuel efficiency (~20% more efficient). Risks: High ATF prices; weak INR; and competition from Air India and Akasa Air,” Nuvama added.

In a note to the financial statement submitted to the BSE, SpiceJet said it has availed funds worth ₹151 crore and ₹60 crore under the ECLGS in the December and September quarter, respectively.

“The profits have been driven by a strong performance in both our passenger and cargo businesses. There are renewed signs of recovery and some very positive developments and restructuring initiatives in the immediate offing that would significantly strengthen and deleverage our balance sheet. Air travel has come roaring back, touching newer heights… we look forward to a robust and exciting 2023,” said SpiceJet Chairman and Managing Director Ajay Singh.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.