Indian airline SpiceJet has announced that it has hived off its cargo and logistics business, SpiceXpress, into a separate entity known as SpiceXpress and Logistics Pvt Ltd, effective from April 1. The move has resulted in a one-time gain of INR 2,555.77 crore ($341 million) for SpiceJet, which has substantially reduced its negative net worth, according to the company. The separation will also allow SpiceXpress to raise funds independently.
SpiceJet Ltd Chairman Ajay Singh said that the decision to hive off SpiceXpress was in line with the company’s long-term business plan, and would unlock significant valuation of the logistics business. Singh further added that the separation of the cargo and logistics arm is a stepping stone in the company’s growth story, which shall unfold in the times to come.
SpiceXpress reported a net profit of INR 51.4 crore ($6.8 million) for the April-December period of FY23.
The move is expected to boost the growth of SpiceJet’s cargo business and provide a more streamlined and efficient service to its customers, according to the company. The consideration for the slump-sale will be discharged by SpiceXpress by issuance of securities in the combination of equity shares and compulsorily convertible debentures to SpiceJet for an aggregate amount of INR 2,555.77 crore, which will also strengthen the balance sheet of SpiceJet, it said.
Singh said that the hive off will not only enable SpiceXpress to raise cash independently, but it will also significantly reduce SpiceJet’s negative net worth. Having restructured over $100 million of outstanding dues to Carlyle Aviation Partners last month, the hive off will further strengthen and deleverage SpiceJet’s balance sheet.
SpiceXpress will provide greater and differentiated focus to cargo and logistics business, according to Singh, and will allow the possibility of raising capital for the business to accelerate its growth. Both SpiceJet and SpiceXpress have great potential and will complement each other well, he added. The move is expected to pave the way for SpiceXpress to raise funds independently, thereby enabling it to accelerate its growth.
