The Deal And After
As part of share sale and purchase agreement, Maran transferred his 58.46 per cent of SpiceJet stake to Singh in February 2015. The deal also received requisite statutory clearances, though not everyone agrees with the level of transparency. The most vocal among those who criticise the deal is senior BJP leader Subramanian Swamy. He has already written a letter to PM Modi seeking an inquiry into the manner in which the deal was made. In Mid-May, Swamy also filed a petition in the Supreme Court seeking an inquiry into the matter. “Maran offloaded 58 per cent of SpiceJet shares to Ajay Singh. But, at what price? How can you keep that a secret? It is against company law, it is against the Sehi regulations,” says Swamy.
Swamy also complained that the deal occured without a mandatory open offer, which is against company law.
“Sebi claims that it made an exception. How can it do
that? What is his (Singh’s) net worth? How is he running the airline? Where does the money come from? Did it come from some offshore bank in Britain?” he asks. In his petition in the Supreme Court, Swamy illustrates the SpiceJet deal in the context of black money. “I have sought an inquiry. The court has on 13 May asked the government to respond,” he says. Singh refutes all the allegations raised against him. “We acted completely as per Sebi’s rules and regulations. There were provisions in the Sebi law that permitted an exception under certain conditions. And we used those provisions,” he clarifies.
On the larger ground of equity and fair play, Singh says that Sebi has only done its job of protecting investor interest. “If this acquisition had not happened, the value of the shares held by small investors would have gone to zero.
So, by doing what we did, we protected the small investors. They would have been zero. They are at 20 bucks now. I followed the law, I acted in the interest of SpiceJet, and its small investors.”
Singh says that the money (Rs 550 crore) that he has infused since acquisition has come from a mix of investors and banks. “We are getting a lot of funding offers from various players such as private equity, debt providers, hybrid products and even foreign airlines. We will choose the mode of investment that comes at the lowest cost. If any further dilution of stake is needed, that will be done at better valuation. Our im-
proved performance will reflect in our stock price. We would need another Rs 500 crore for complete revival of the company.” So how much time to reach the 2010 level?
Singh says that he is still planning. “The first order of business was to stabilise. To make sure that flights start on time, as we were down to almost 40 per cent on time performance. In March and April, we have crossed the 80 per cent margin,” he claims. The company has stabilised that. It has brought some of the most outlier costs under control. “We shut down some airports and curtailed the network to get back to low-cost model — which is fewer stations and higher frequency to these stations,” he adds.Singh is also renegotiating debt-restructuring plans. “We have amended the contracts. We are re-negotiating a large number of contracts to bring the costs back in line.”
A new SpiceJet board is also in the making. “We have applied for four members in the board. Security clearances have come for three. Harsha Vardhan Singh, former deputy director general of World Trade Organisation, is one of them. As we expand, we look to get aviation professionals, finance professionals on board,” he adds.
He also refutes the charges of nonpayment of dues. “Ever since I joined I have cleared all the statutory debts and every single rupee of bad debt, all employee salaries are up to date and oil companies are paid,” says Singh. The company’s cash flow has become much stronger than anticipated, according to Singh who so far has pumped in Rs 550 crore and has a larger funding plan to infuse capital as and when required. They were reports that the Lessors aircraft owners had sought the return of their Boeing aircraft and a payment of millions of dollars from SpiceJet to cover several months of unpaid rent and maintenance costs. ‘We have cleared debts of Lessors and are in the process of paying large creditors, in some cases, vendors have agreed to be paid in instalments, things are under control at the moment,” says Singh.
The crisis had also resulted in an exodus of top-level management, pilots, cabin crew etc., says Kiran Kotesh- war, chief financial officer and acting human resource head of SpiceJet. “Since Maran was not physically present in a day-to-day business, there was an environment of gloom among employees especially during the crisis time that the airline went through in the last few months. But Singh’s presence in the office exudes confidence and motivation among employees that things will go right because he is a very hands-on executive,” says Koteshwar.
According to him, the company is still looking for a fulltime HR Head. “We will hire about 100 pilots, 50 commanders and as many co-pilots. We will also hire 200-odd cabin crew and flight engineers,” adds Koteshwar. At present, SpiceJet has a fleet of 17 leased Boeing 737s and 15 Bombardier Q400s that it owns.
Singh believes in a flat and leaner organisational set up. He is hiring old hands who left the place during Maran’s time. With Singh back in SpiceJet, many who had quit are returning now. Singh had made it clear that he would give first opportunity of joining to those who had either quit or had been laid off during the airline’s difficult days. Some have already returned. As part of his cost-reduction strategy, Singh has trimmed his expensive top management. “I want a leaner management with responsibilities dispersed equally at the mid-level,” says Singh, who fired the top load that were drawing salary of Rs 2 crore per annum.
With all the revamping and restructuring, Singh has no more time to spin off his mantra: “Fly our flights on time, make sure they are safe, clean, and the people who are flying are happy. The fares are reasonable. Just stick to the basics.” Ed