Is SpiceJet actually witnessing a remarkable turnaround through
historically high load factors and shrinking of operations to bring in
more effeciencies? Or are there red flags still in its growth story?
First of all, a note of caution for investors. There is significant uncertainty in SpiceJet's ability to continue on a "going concern" basis due to several factors, the airline said in its own post-results statement. These factors include delays in payments to vendors and repayment of statutory dues by the airline over the last 12-18 months, continued pricing pressures due to competition and a weak rupee. SpiceJet has accumulated losses of Rs 313,895.4 lakh or Rs 3138.95 crore as of June 30 against shareholders funds (including advances towards subscription securities) of just Rs 119,611.4 lakh or Rs 1196.11 crore. "As on date, the company's total liabilities exceed its total assets by Rs 114,284 lakh," the statement said.
AFPAFP
Second, HSBC has reiterated its 'Reduce' rating at an unchanged target price of Rs 10 per share, implying 60 percent downside. According to Moneycontrol.com, the brokerage feels the airline's earnings momentum is likely to weaken from here due to increased industry supply and a weak rupee. On a cautious note, HSBC feels the performance is unlikely to be sustainable. “Not only is the industry supply fast catching up but the rupee weakness and seasonally weak travel periods ahead suggest that the earnings is going to slow down," the HSBC note says.
Thirdly, in a note ahead of the results, global aviation industry CAPA estimated that SpiceJet needs further "critical" investment of $200 million or close to Rs 1200 crore in this fiscal for turnaround "but not likely" in the near term.
SpiceJet has held intermittent talks with prominent Gulf based airlines for a strategic investment but nothing has fructified till now. An airline official said yesterday the airline's Q400 fleet could be of special interest to foreign airlines wanting a toehold in the Indian market since these aircraft can effectively connect tier II and remote areas with the metros. Another official pointed out that the Read news in full .29/07/15 Sindhu Bhattacharya/First Post
First of all, a note of caution for investors. There is significant uncertainty in SpiceJet's ability to continue on a "going concern" basis due to several factors, the airline said in its own post-results statement. These factors include delays in payments to vendors and repayment of statutory dues by the airline over the last 12-18 months, continued pricing pressures due to competition and a weak rupee. SpiceJet has accumulated losses of Rs 313,895.4 lakh or Rs 3138.95 crore as of June 30 against shareholders funds (including advances towards subscription securities) of just Rs 119,611.4 lakh or Rs 1196.11 crore. "As on date, the company's total liabilities exceed its total assets by Rs 114,284 lakh," the statement said.
AFPAFP
Second, HSBC has reiterated its 'Reduce' rating at an unchanged target price of Rs 10 per share, implying 60 percent downside. According to Moneycontrol.com, the brokerage feels the airline's earnings momentum is likely to weaken from here due to increased industry supply and a weak rupee. On a cautious note, HSBC feels the performance is unlikely to be sustainable. “Not only is the industry supply fast catching up but the rupee weakness and seasonally weak travel periods ahead suggest that the earnings is going to slow down," the HSBC note says.
Thirdly, in a note ahead of the results, global aviation industry CAPA estimated that SpiceJet needs further "critical" investment of $200 million or close to Rs 1200 crore in this fiscal for turnaround "but not likely" in the near term.
SpiceJet has held intermittent talks with prominent Gulf based airlines for a strategic investment but nothing has fructified till now. An airline official said yesterday the airline's Q400 fleet could be of special interest to foreign airlines wanting a toehold in the Indian market since these aircraft can effectively connect tier II and remote areas with the metros. Another official pointed out that the Read news in full .29/07/15 Sindhu Bhattacharya/First Post
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