Indian low-cost carrier Spicejet has finally spun off its SpiceXpress freighter business as it looks to grow the company.
SpiceJet says that SpiceXpress became a standalone entity on April 1 through a slump sale worth around Rs25 billion ($304 million).
The airline will retain a 98% shareholding in the freighter operator with the remaining 2% owned by SpiceXpress Employees Welfare Trust. The new entity will be known as SpiceXpress and Logistics. The company first announced plans to spin off its cargo business in 2021.
The move will help SpiceXpress to raise cash independently and reduce SpiceJet’s negative net worth. SpiceJet posted net loss of over Rs15bn for the first nine months of the year ending March 2023.
The airline last month agreed to a debt-for-equity deal with lessor Carlyle Aviation Group, which saw the airline restructure close to $100m in outstanding payments into shares and compulsory convertible debentures. The hive-off will further strengthen and deleverage the airline’s balance sheet, SpiceJet says.
“The transfer of cargo business undertaking to [SpiceXpress and Logistics] will provide greater and differentiated focus to cargo and logistics business and will allow the possibility of raising capital for the business to accelerate its growth,” SpiceJet says. “The transfer, with separate and enhanced management focus, will provide greater opportunity and flexibility in pursuing long-term growth plans and strategies.
“It will also assist the management in evaluating the business performance as an independent entity while leveraging and unlocking significant value for the Company and its shareholders.”
SpiceJet managing director Ajay Singh says: “The separation of our cargo and logistics arm is a stepping stone in our growth story which shall unfold in the times to come.
“SpiceXpress will provide greater and differentiated focus to cargo and logistics business and will allow the possibility of raising capital for the business to accelerate its growth.
“The decision to hive off SpiceXpress is in sync with our long-term business plan and will unlock significant valuation of the logistic business. Both SpiceJet and SpiceXpress have great potential and will complement each other well.”
Singh recently said the new unit is expected to get a large number of dedicated freighters in the near term, while the cargo business will “help pay off” some of the airline’s liabilities.