“Maran offloaded 58 per cent of SpiceJet shares to Ajay Singh. But at what price?” SUBRAMANIAN SWAMY, BJP leader

He was also part of BJP’s key campaign team in the last general elections and is credited with coining the winning phrase, “Ab ki boar Modi sarkaar”.

Almost five years later, Singh was told that the airline he helped build will either have to be taken over by him, or be left to die. “My sense initially was that the problems (that led to mounting losses and a desperate stake sale plan) were pretty severe. I said I am willing to look at it, but I need to understand what the problems are,” he says.

The Maran-Singh dialogue did not get anywhere at that time. Three months later, Maran approached Singh again.

This time, he was very clear, says Singh: “They said I should take a call, otherwise they will shut it down.”

Goldman Sachs had given “dud” value to SpiceJet. Ac­cording to industry experts, the enterprise value of the company at that time was Rs 3,000 crore in accumulated losses that it had made, and Rs 1,400 crore of liabilities it had. Singh was virtually offered the airline “free”, though it was his responsibility to raise enough funds to steer the company away from its liabilities and turn it around.

The call Singh eventually took is evident from the fact that he today owns over 60 per cent stake in SpiceJet.


Jan 2015

Sees fleet reduction, flight cancellations with shutdown

Feb 2015 Maran

sells58.46% stake to Ajay Singh, who now

holds6031% stake as


Though the takeover was not without controversies, it is very clear that Singh means business. He claims to have cleared all debts of the ailing company in just three months since the takeover in December last year. The company is talking about fleet expansion and fresh hiring. His revival strategy for SpiceJet is to get the basics right.

Experts are not ruling out the revival possibilities either. “They have to recoup a lot of things. Overall, it looks posi­tive,” says Amber Dubey, partner and head, aerospace and defence, KPMG India. “They are back in business. Com-

petition is always good for the entire aviation industry. Not only does it keep us on our toes, it also pushes us to keep improving our products and services,” says Phee Teik Yeoh, CEO, Vistara.

Second Coming

As promoter of the airline, it was a second coming for Singh. His entry as SpiceJet promoter for the first time happened in December 2004 when he, along with his in­vestor friends re-named and re-launched Royal Airways (originally known as Modiluft) — an airline company that had suspended its operations in October 1996 — as Spice­Jet. The following years saw the company pursue a low- cost model to increase its fleet size, network of operations and revenues to culminate into some profit in 2010, the year when Maran took control.

Several things changed after SpiceJet became part of the Sun Network. And some of which proved too costly for Maran. “I think the airline deviated from its principles of trying to reduce cost on a regular basis. You have to keep knocking down costs which I didn’t think was the focus under Maran’s leadership,” says Singh. He also points out that there was a lot of dilution of revenues due to faulty design of promotional schemes. “They went more for spread, in terms of opening up of large number of opera­tions as opposed to having higher frequency. Also, the air­line was functioning under an absentee leadership be­cause Maran was not physically present here (in Delhi, its operational head quarters). It’s a very competitive space, you can’t afford a hands-off deal,” says Singh.

An investor note from ICICI Securities, which an­nounced the suspension of SpiceJet coverage on 17 De­cember 2014, explains the dire situation that compelled Maran to take the airline company to Singh a second time: “SpiceJet has reduced flights across its network from 332 daily to 239 from 1 September till date. It has cancelled 1,861 flights till this month end, which has also affected its brand image. With three consecutive years of net losses and mounting outstanding dues of over Rs 2,000 crore, it needs at least Rs 1,000 crore immediately to keep it off the ground. Given this backdrop, amid high uncertainty over funding, we suspend our coverage on the company and recommend that investors exit the stock.” If SpiceJet was in such a bad shape and seemingly at point of no-retum, how did Singh became interested in it?

“The fuel prices were low, the economy was picking up, the brand was good, and it was a brand that I intimately knew,” says Singh. “I also thought it was a national service. But it couldn’t have been done if there wasn’t a rational reason. I knew there was an honourable way to do it and I had the ability to do it,” he says.


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