Govt's loan scheme gives the wings to SpiceJet stock

Mumbai: Shares of SpiceJet soared 8.8% on Thursday as investors lapped up the stock on hopes that the government's collateral-free liquidity window for the aviation sector would ease airlines' cash flow woes.

The stock closed at ₹41.85 after rising as much as 9.1% to hit the day's high of ₹42.50. More than 10.5 million shares exchanged hands on the BSE and NSE compared with a one-month average daily volume of 2.31 million shares on both exchanges, Bloomberg data showed.

The credit line comes as a breather for SpiceJet, which was struggling to pay employee salaries till last month.


Cash-strapped airlines may, however, continue to be weighed down by unpredictable fuel costs, which account for more than 40% of operational expenses.

"The recent decline in crude oil prices to $85 per barrel (from $112 per barrel in Q1FY23) could ease ATF prices - although a further weakening of the rupee against the dollar would blunt potential gains," said Jal Irani, senior vice-president, institutional equities at Edelweiss Securities.

SpiceJet is eyeing 1,000 crore in collateral-free financial aid at reasonable interest rates, which chairman Ajay Singh described as a “tremendous boost for the airline”.

Singh has also sought further support from the government to bring aviation turbine fuel (ATF) under the purview of goods and services tax (GST).

SpiceJet shares have collapsed nearly 60% since November 2021 as its operations took a hit after a series of incidents of mid-air safety failures.

The Directorate General of Civil Aviation (DGCA), the statutory body that regulates the domestic airline industry, had imposed a restriction on SpiceJet, allowing it to operate only 50% of its flight departures.

Though the stock price has recovered from its 52-week low of 34.60 on July 28, long-term investors will look for more evidence of a stronger recovery.

Edelweiss has a hold rating on SpiceJet shares with a target price of 47 apiece. The target price implies a 13% upside from Thursday’s close.

Cash-strapped airliners have been seeking to raise funds to minimise the impact of a seasonally weak quarter.

Domestic traffic likely declined by 10% quarter-on-quarter between July and September to 30.2 million and traffic has plateaued at around 90% of the pre-pandemic levels for the past several months, according to Centrum Broking.