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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 512.04 | ACUITE C | Downgraded | - |
| Bank Loan Ratings | 278.48 | ACUITE D | Downgraded | - |
| Bank Loan Ratings | 78.20 | - | ACUITE A4 | Reaffirmed |
| Bank Loan Ratings | 581.28 | - | ACUITE D | Downgraded |
| Total Outstanding | 1450.00 | - | - |
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Rating Rationale |
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Acuité has downgraded its long-term rating from ‘ACUITE B’ (read as ACUITE B) to ‘ACUITE D’ (read as ACUITE D) on Rs. 278.48 Cr. bank facilities and downgraded its long-term rating from ‘ACUITE B’ (read as ACUITE B) to ‘ACUITE C’ (read as ACUITE C) on Rs. 512.04 Cr. bank facilities. Further Acuité has reaffirmed its short term rating of 'ACUITE A4' (read as ACUITE A four) on the Rs. 78.20 Cr. bank facilities and downgraded its short term rating from 'ACUITE A4' (read as ACUITE A four) to ‘ACUITE D’ (read as ACUITE D) on the Rs. 581.28 Cr. bank facilities of Spicejet Limited (SpiceJet).
Rationale for rating The rating revision is on account of delay in repayment of term loan by the company. Further, there were few instances of BG invocation. Acuite continues to factor the weak financial profile and incessant business challenges faced by the company on operational front due to grounding of ~40 % of its existing fleet of 54 Aircrafts as on 30-November-2023, this has resulted in higher fixed expenses and thus significant operational challenges. Accordingly, company has lost market share to its competition from 10.5% in Calendar Year(CY) 2021 to 8.7% in CY22 to 5.5% in CY23 dipping its position from 3rd largest player to 5th largest player. The rating drives support from company’s established track record of operation, experienced management and diversified revenue stream. The company has currently raised equity to the tune of Rs. 1100 Cr. in Q4FY24 however, the frequent order for payment of past dues (operational creditor) from hon'ble courts might still impact liquidity position and needs to be monitored. |
| About Company |
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Established in 1984 and based in Gurugram (Haryana), SpiceJet Limited (SpiceJet) was initially set up as an air taxi provider. In 1993, the company diversified into domestic aviation service provider business and changed its name to ‘Modiluft’ in 1994 through a technical partnership with Lufthansa AG. In 2000, the company got a new name - Royal Airways. In the year 2005, the company got its prevailing name, when its services were re-launched. SpiceJet operated its first flight in May 2005 and commenced operations with 3 leased Boeing 737-800s fleets. In 2008, a US-based asset investor, Mr.Wilbur Ross acquired a 30 percent stake. In June 2010, Mr. Kalanithi Maran, Chairman and Managing Director of the Sun Group, acquired 38 percent stake in SpiceJet from the US- based investor, Mr. Wilbur Ross and the UK-based Kansagra family. The stake was sold back to Mr Ajay Singh (present promoter) in January 2015. Mr. Ajay Singh and HUF holds around 59.54 percent as on June 30, 2023. Spicejet follows the Low Cost Carrier (LCC) business model with an objective to deliver the lowest air fares with the highest consumer value, to price sensitive consumers. SpiceJet, a public limited company, is listed on Bombay Stock exchange (BSE) and National Stock Exchange (NSE) and is promoted by Mr. Ajay Singh with majority holdings. The airline had a total fleet size of 54 aircrafts (19 Boeing NG (700/800/900), 9 Boeing max (737), 23 Q-400 and 3 freighter aircrafts) serving domestic as well as international destinations as on November 30, 2023.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated business and financial risk profiles of SpiceJet Limited and its subsidiaries to arrive at the rating. Following is the list of entities consolidated:
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| Key Rating Drivers |
| Strengths |
| Established brand in the domestic aviation sector and established track record of operations
SpiceJet is a well recognise brand with a 5.5% percent market share in the domestic aviation segment for the calendar year 2023. SpiceJet is currently ranked at fifth position amongst the Indian domestic airlines in terms of passengers carried (Pax) trailed by Akasa Air, Alliance Air, Star Air and Fly Big. It is one of the largest regional player in the country with multiple UDAN flights operating across destinations under the regional connectivity scheme. The company’s fleet size stands at 50 aircrafts as on 30-Sep-2023 out of which 31 are operational. The company aims to increase its fleet size by induction of the highly fuel-efficient Boeing 737 Max aircrafts over the near to long term. Experienced management and healthy business model with diversified revenue streams SpiceJet, a Low-cost carrier segment airline provider, has established presence in the Indian aviation industry. Mr. Ajay Singh, the Chairman and Managing Director of SpiceJet, has more than 15 years of experience in the line of aviation and is involved in the day-to-day operations of the company. In the past, through his extensive and rich experience, Mr. Singh successfully turnaround SpiceJet Limited by undertaking and implementing various measures in revenue and cost management, customer retention and employee welfare. SpiceJet, over the years with its established presence in the aviation industry has been able to diversify its revenue stream for its cash generation. The company majorly has two streams; Primary (Passenger air travel), Ancillary (Preferred Seating, Business Class, Spice Max, Loyalty Programmes, Insurance, Meals, Spice Vacations, Lounge, Visa, Cab, Cargo, Onboard Merchandise), and, Cargo business. The company has also added aircrafts for passenger and cargo operations on wet lease basis. Acuité believes that the presence of diversified revenue stream and robust fleet will aid SpiceJet’s revenue profile over the medium term. |
| Weaknesses |
| Delay in term loan repayment and BG Invocation
The company made a delay in term loan repayment. Further, there were few instances of BG invocation. Weak financial position The company’s financial risk profile is poor marked by marked by negative networth of Rs. (5,850.64) crore as on March 31, 2023 as against Rs. (4,340.22) crore as on March 31, 2022. The deterioration in networth is due to accretion of losses to reserves. Further the company's leverage remained poor as apparent from debt/ equity of -0.20 times as on March 31, 2023. The debt coverage indicators of the company remained below average with Interest Coverage ratio and DSCR standing at 0.03 times in FY23. Further the company has negative cash accrual of Rs. (490.21) crore in FY 2023. Susceptible to volatility in aviation fuel prices and fluctuation in foreign exchange rates The aviation turbine fuel (ATF) is one of the major cost component of SpiceJet which accounts around 35 - 40 per cent of the revenue of the company. The ATF prices are directly linked to the crude oil prices which remain volatile and the company incurs a major part of its operating expenses like lease rentals, aircraft maintenance and repairs in foreign currency. The profitability of SpiceJet is highly susceptible to the volatility in ATF prices and fluctuations in foreign exchange rates. Further, the company faces intense competitions from other LCC operators in the industry which restricts SpiceJet to pass on any increase in prices to its customers. Nevertheless, higher proportion of fuel efficient Boeing Max aircrafts to be operated by the company in the near future is likely to partially offset the risk of volatility in ATF prices to a certain extent. Significant proportion of grounded fleet The airline has a fleet size of 54 aircrafts as on November 30, 2023. Out of the said 54 aircrafts, 21 aircrafts are non-operational. The grounding of aircrafts is primarily due to non-payment of lease rentals to the lessors and the supply chain crunch which restricts the aircrafts from visiting the shop floor for maintenance. The airline is in the process of raising funds for ungrounding these aircrafts. However, until the funds are raised, a substantial portion of the fleet will remain grounded which will affect the revenue generation capabilities of the airline. |
| ESG Factors Relevant for Rating |
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Environment
Environmental issues related to the air transport industry is a key concern. GHG emissions, air pollutant emissions, environmental management, energy efficiency, ESG reporting and waste management are significant environmental issues for this industry. Social Labour management issues, such as employee safety & development and employment quality, is a crucial issue in air transport industry. Furthermore, key material issues such as community support & development, product quality & safety, human rights, equal opportunity and responsible procurement have a significant impact on the social scores for this industry. Governance Air transport industry is highly exposed to governance risks associated with regulatory compliance, board oversight, business ethics and corrupt practices. Furthermore, inadequate anti-takeover mechanism, management & board compensation, board independence & diversity, audit committee functioning, financial audit & control and shareholders’ rights are the key material issues for this industry. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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SpiceJet’s liquidity is stretched marked by inadequate net cash accruals to its maturing debt obligations resulting into delay in term loan repayment and BG invocation, modest level of unencumbered cash and bank balance. The net cash accruals have been negative in FY 2023 at ~Rs. 490.21 Cr. The company had long term debt obligations of Rs. 312.88 – 459.30 Cr over the last 3 financial years. The company’s working capital is moderate as evident from Gross Current Asset (GCA) of 79 days as on March 31, 2023 as compared to 104 days as on March 31, 2022. The current ratio stood below unity at 0.22 times as on March 31, 2023. It remained below unity even in the past 2 years ending March 31, 2022. Acuité believes that the liquidity of the company is likely to remain stretched over the short term on account of cash losses from operations vs the maturing debt obligations. The company has currently raised equity to the tune of Rs. 1100 Cr. in Q4FY24 however, the frequent order for payment of past dues (operational creditor) from hon'ble courts might still impact liquidity position and needs to be monitored.
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| Outlook : Not Applicable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 9897.07 | 7417.83 |
| PAT | Rs. Cr. | (1512.95) | (1666.81) |
| PAT Margin | (%) | (15.29) | (22.47) |
| Total Debt/Tangible Net Worth | Times | (0.20) | (0.25) |
| PBDIT/Interest | Times | 0.03 | 0.26 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm |
| Note on Complexity Levels of the Rated Instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) |
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