Shares of cash-strapped airline SpiceJet climbed over 4% on Monday amid reports of a potential stake sale by the company's promoter Ajay Singh and a restructuring announced by the company.

What Happened: The airline’s chairman and promoter Ajay Singh is looking to offload about 10%-15% of his stake in the financially troubled airline, PTI said.

The potential stake sale is reportedly part of a funding round expected to close by the end of September. At the end of June 2024, Singh, along with his family, held more than 47% of the airline.

SpiceJet is aiming to raise about ₹3,000 crore via a qualified institutional placement (QIP). Talks with potential investors have already taken place both domestically and abroad, the report added. These funds are likely to be used to cover ongoing losses and meet working capital requirements due to the current shortage of aircraft, global brokerage HSBC said.

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It delivered a bearish view of the stock amid ongoing financial issues at the company. The brokerage had a "reduce" call for the stock and it cut the target price to ₹26. HSBC's negative outlook stems from a lack of visibility in the firm’s capacity expansion and profitability. The brokerage considers SpiceJet’s current valuation too high, given its significant debt and small 3% market share.

Moreover, the company plans to issue shares to Carlyle Aviation as part of a restructuring agreement to convert part of its dues into equity, according to a press release last week.

Carlyle Aviation will receive SpiceJet shares to settle $137.68 million (₹1,149 crore) of its outstanding dues. The restructuring will reduce SpiceJet's dues to $97.51 million (₹818 crore).

In the past months, the airline has been in the headlines several times. At the end of August, the Directorate General of Civil Aviation put the airline under enhanced surveillance with increased spot checks and night-time surveillance to ensure operational safety. 

Last week, Delhi International Airport Ltd (DIAL), which operates the Indira Gandhi International Airport, reportedly requested SpiceJet to settle its outstanding dues as soon as possible.

Price Action: SpiceJet’s shares were up 4.46% at ₹64.20 during early trade on Monday.

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