SpiceJet Ltd.'s preferential share issue to aircraft lessors may be at nearly twice its current valuation in the share market, after the Securities and Exchange Board of India indicated that it will not require independent valuation.
The regulator, in an informal guidance to the airline, said the decision to issue preferential shares to the lessors as a means of fulfilling its rental obligations would amount to issuing preferential shares in lieu of cash.
This means the issue will be covered under Regulation 167 (2) of SEBI's Issue of Capital and Disclosure Requirements regulations, as opposed to Regulation 163 (3), which requires a valuation report by an independent registered valuer.
The budget carrier had written to the markets regulator to seek clarifications on the rules under which the shares will be issued. The informal guidance is an opinion on the issue and not an order from the regulator's board.
After a board meeting in February, SpiceJet announced that it will issue equity shares, amounting to 7.5% stake of the company, on a preferential basis to Carlyle Aviation.
Carlyle Aviation Partners is the commercial aviation investment and servicing arm of Carlyle's $143 billion Global Credit platform.
Upon conversion, the shares issued will be equivalent to an amount not exceeding $29.5 million, valuing SpiceJet at Rs 48 per share.
The transaction will wipe out over $100 million in debt for the cash-strapped airline, thereby strengthening its balance sheet for future expansion, SpiceJet had said while announcing the deal.
The airline's shares closed 7.8% higher at Rs 26.05 a share on Wednesday, as compared to a 0.3% fall in the Nifty 50.
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